For stocks, the idea of “buy and hold” has long been championed as a wise investment strategy. However, in recent years, this concept has been challenged and questioned. Now, as we enter a new year and move past the year-end sell-off, buy and hold returns as a powerful principle.
During the pandemic and its aftermath, the stock market went on a roller coaster ride. But how did the buy-and-hold strategy fare? Let’s take a look at the numbers. On December 30, 2020, the Dow Jones Industrial Average stood at 30,415. By January 1, 2024, it had risen to 37,689, resulting in a 24% gain, or an 8% average annual gain. However, some might argue that strategically taking money out of stocks and bonds and reallocating it could potentially yield even better results.
To further explore this, let’s consider the three-year performance of several leading funds and investment alternatives. The Dow Jones Industrial Average saw a 24% gain, while the Fidelity 500 Index Fund had a 9.74% gain. The BlackRock iShares Core S&P 500 ETF outperformed them both with a 33.53% gain. On the other hand, the Vanguard Total Bond Market Index Fund experienced a -4.47% return. The price of gold per ounce rose by 12.3%, and the price of oil per barrel skyrocketed by 49%.
Looking at these numbers, it becomes clear that buying and holding stocks can be a sensible strategy. Despite a less-than-stellar 2022 performance, the three investment funds demonstrated strong returns over the past three years. While bonds may not move in sync with stocks, they remain a significant investment alternative. As for oil, its attractive rise in price was unexpected but profitable. It goes to show that success in the oil industry requires industry awareness and a sprinkle of luck.
Gold, known for its volatility, managed to perform well during the three-year period. This reaffirms its status as a hedge in uncertain times. But perhaps most interestingly, active investing, where investors shift their money strategically between different investment alternatives, can pay off. BlackRock’s success can be attributed, in part, to their inclusion of blue-chip companies that saw setbacks during the pandemic but eventually rebounded.
In conclusion, while beating the market has always been a goal for investors, the buy-and-hold strategy supported by well-selected investments has shown itself to be a viable alternative. Whether it’s riding the ups and downs of the stock market or strategically allocating funds, there are different paths to success. The important thing is to stay informed and adapt to market conditions.
