I just looked at the site James gave me and the closing price of MSFT on 4/17/89 was $51.50 (adjusted for splits $0.715278) making the price of 100 shares at that time $5150. If I did the math correctly 100 shares would have grown into about 7200 shares and would be worth $743,400 today. Buy and Hold would have certainly worked out for the speculative investor in the upstart challenger that was msft in 1989. Of course, that assumes that the investor did not get discouraged when the inevitable pull-backs occured along the way. Unless one is an unflinching adherent to the buy and hold strategy, the natural tendency is to hold until the stock starts to go down, hold a little longer, a little longer, etc. and then cash out for a paltry gain and chase some other stock that has already moved up appreciably and is the new market darling (aka sell low and buy high). There are many different investment strategies, but to be successful, over the long term, in any of them, the principles of the strategy must be slavishly followed. For the buy and hold investor that means hanging on when the price is going the wrong way, and if you are truly convinced that the company has the best management and marketing in their segment, one should increase their holdings in the company when it is out of favor. It is difficult, psychologically, to do this unless one has faith in the strategy and the company. It isn't necessary for the company to have the best product in their segment. If they have the smartest management and the best marketing the majority of buyers will be convinced that the company has the best product and the company will stay ahead of the competition. The strategy works but only if you can follow the rules when it seems like a very risky thing to be doing with your hard earned money.
Steve |
