Is buy-and-hold due for a comeback?

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I’m a big fan of the monthly newsletter authored by Jim Paulsen of Wells Capital Management. You’ve got to love the fevered way he draws all over his charts (I’ve reproduced a sample at the end of this post). Then there’s his punctuation, extremely heavy on the exclamation marks and scare quotes. Finally there’s what he says, which, while certainly not right all the time, is usually leavened with real market wisdom. An example from his latest letter:

By the early-1980s, after more than a decade of flat and volatile stock prices, market-timing was all the rage, just in time for a record-setting 20-year bull market run where only the market-timers lost money! By the late 1990s, “buying and holding technology companies” was a sure thing. After all, we were in a “new-era” that would drive stocks higher forever! Today, after a decade of stock market blues and after the worst financial panic in the postwar era, “buy-and-hold” is again dead! Most believe the “world will never be the same,” and investors should prepare for profiting from volatile and trendless markets by adopting strict “trading rules.” Anyone see a pattern here? Our guess is, after more than 10 years of market malaise, buy-and-hold may once again be on the cusp of proving a great investment strategy.

I agree, as long as one understands “on the cusp of” to mean that it will happen sometime in the next decade.

Here, as promised, is a representative Paulsen chart: