Hi Larry, Yes, Buy&Hold wins in bull markets. However, only at the risk of being 100% invested all the time.
If we don't need insurance, we shouldn't buy any! :-)
That's what any risk management method is - an insurance policy against significant loss.
There are different types of insurance, diversification, asset allocation and market timing are some. AIM is another. The point isn't so much that AIM/VTSS ONLY made 2100% but would one have stuck with the investment for the 8600% gain? If the answer is "NO", then AIM was a better choice.
Since the marketplace is my only source of income, I would have no cash for buying stocks when they are weak without AIM. If I don't sell off some shares when they are high priced, I'll not have any money to invest when they are low. I don't feel I can afford to remain fully invested through all markets under my "retirement" circumstance.
I'm glad you took the time to study the 1970 to 1980 period which contained one of the worst markets in history. It tells you how bad things can be. What index did you study? I ran 20 years of data into a spreadsheet using the 1969 to 1989 Value Line Composite Index once. AIM beat Buy&Hold by about 50%. It also did it with significantly less risk.
If we can even equal Buy&Hold during bull markets with less risk, then we've accomplished something. If you run long term histories on IBM I think you'll find that AIM does quite well. I'm not sure what to guess on XOM or KO. I follow XOM now, but don't have a long history with it.
As a category of stocks, cyclical mature companies have great safety, but not much growth. AIM does quite well with these types of stocks. Better with these than with pure growth stocks.
Best regards, Tom |
