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Mon, Oct. 27th, 2008, 06:23 pm
kidbluegrass: Buy and hold....

S&P 500 closing price October 27, 1998: 1,065.34

S&P 500 closing price October 27, 2008: 848.92 (-20%)

Buy and hold... so easy a caveman could do it...

Tue, Oct. 28th, 2008 04:11 am (UTC)

What happens when all of the dividends that were paid inbetween then and now are reinvested?

Wed, Oct. 29th, 2008 03:26 am (UTC)

I tried to track this down and found this page of dividends. It looks like the dividend yield ranged from 1.14% to 1.89% over the last 10 years. Of course, just about every reinvestment would have been at prices higher than 848.92 except for the 2002-2003 time frame.

If you had on average 1.6% yield on a bond for 10 years, that would be a little over 17% compounded. However, since this isn't fixed income it's a little harder to gauge without the actual reinvestment timing. But, it looks like a good bet that a t-bill would have beat this since t-bill dividends are probably higher for most years and the s&p 500 never gained a huge amount that would have multiplied it's low dividend yield.

I also looked at the spy spider on yahoo. If their "adjusted for dividends" numbers are correct,
and we assume the spy spider is very close to the actual S&P 500 index... it looks like it would have been down about -10%.

Of course with the market going up 10%+ today, we might not need to "buy and hold", but "buy and hang on". The entire market seems to be acting more like an individual stock now with all of this volatility. Who knows were it will be in another month...

Thu, Oct. 30th, 2008 08:42 pm (UTC)
spitzcor: 10 years is still short term

Warren Buffett might argue that 10 years is still short term, right? Buy and hold means forever. Then again, Buffett wouldn't invest in the S&P 500. But he would recommend that most people hold index funds and for the long term too.

Fri, Oct. 31st, 2008 04:46 am (UTC)

Have you been following Warren Brusses's blog? He replies to alot of the comments and it's good conversation over there.
Looking at the price/dividend ratio, he suggests market will return to an average of 17, and S&P will fall below 700 next year.

Should be interesting to see how inflation affects all this if it returns and props up prices.

I think buy and hold made sense before Greenspan created the current bubble
economy. Perhaps if interest rates are ever again at a rate that doesn't
encourage malinvestment, it will make sense again to buy and hold.
Oh and he's Shocked!, Shocked!, that his bubble got popped.

We are living in fun times!