Buy and Hold - How's that Working for You?

If you have been invested in the market just this past summer, your answer has to be "Great!" But how about over the long-term? The S&P 500 first closed above 1100 on March 24, 1998. So, if you have been invested over the past 11 1/2 years, you would have a market loss of 2.4%and your total return would be slightly less than the dividends paid on S&P stocks which have historically averaged about 2%. To The Seasonal Investor, a less than 2% annual return is rather unappealing.

Over the past two years, the return from buy and hold is even more pathetic. On The Seasonal Investor's buy in date in 2007, the S&P 500 sat at 1514. As of Friday, October 23, 2009, the S&P 500 sat at 1079, down a whopping 29%. Factor in two years of dividends and a buy and hold investment would only be down about 25%.

Following The Seasonal Investor's buy in October and sell in May method, The Seasonal Investor's return over the past 10 years was over 94% or a compounded return of about 7%. Over the past two years, The Seasonal Investor has a return of 5.3%. Not a sensational return over 2 years but miles better than the 25% loss from buy and hold.

So, while The Seasonal Investor may not have participated in the large gains achieved over this past summer, having avoided the 2008 summer drop, The Seasonal Investor's returns still remain superior.

What's next - the October buy-in date. Buy in is scheduled for the close of market on Tuesday, October 27. Have your cash ready for investment on this Tuesday.