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Investors who buy and hold because they think “stocks always outperform bonds and cash over long periods of time,” are wrong. That idea should be allowed to die, and even though it has been killed before, this time we should kill it for good.

There have been many times over the past 100 years when stocks delivered very long periods of lower than expected returns, and I suspect that investors didn’t want to own them at the end of every one of those periods.  The point is not that there is never a time to buy and hold. The reason to buy and hold has to do with the valuation of the stock market, and not the false notion that it is always a good time to buy stocks. Investors who wanted to “put their money to work” in the year 2000 haven’t made a dime in 9 years. In fact, the trailing inflation adjusted 20 year return for U.S. stocks is less than it is for bonds. I’ll bet a lot of people don’t realize that. There is nothing wrong with long-term investment strategies as long as they consider valuation, as well as other important issues like the business cycle and market internals, as a qualification for owning stocks.