Buy & Hold is a thing of the past because the longevity of moats keeps getting shorter.
Here’s some data to chew. The average tenure that companies spend in the S&P 500 keeps getting shorter & shorter. This means more and more companies’ moats are getting disrupted faster than before.
Here’s one more list. In a matured market like the US, we can see the churn. For example, General Electric stayed in the list from 1960 to 2010 and then it was gone, just like that! Whether or not any other company can beat GE’s record of consistently staying on the list for 6 decades remains to be seen. None of the co’s that made it to the list in the 80s & 90s are have survived in the list.
At overall index level, there have been phases wherein entire markets as a whole did not budge for decades. We can only imagine how difficult it must have been to buy & hold through those decades.
How rumors spread and the importance of verifying the source
On similar lines, I’ve heard some very smart people cite a Fidelity study which claimed “Some of the best returns come from portfolios belonging to dead people.”
And then the source (Jim O’Shaughnessy) comes on Twitter and says this.
For equity investors, all of the above mean adapting to the new reality which is basically that buy & hold worked well once upon a time and no longer works for most companies (the keyword being “most”), because most business models keep getting disrupted, thanks to relentless competition and a host of other things.
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