The Buy and Hold Hall of Fame: 10 Legendary Long Term Investors

by on May 6, 2009

Ever since the financial crisis and the subsequent stock market plunge, reports have been circulating about the death of buy and hold as an investment strategy. While the media, pundits and even investors gleefully predict that buy and hold has come to an end, and that we had better come up with a better strategy for the average investor, there remains a solid core of folks who believe that the reports of the death of buy and hold are greatly exaggerated.

For the average investor — the sort of person whose main investment decisions consist of opening retirement accounts — buy and hold is likely to still provide the best opportunity for long-term returns. Over time, the stock market rises. While there are downturns, when smoothed out over 15 to 25 year increments, the stock market generally wins. If you can hold your portfolio that long, continuing to add to your holdings, chances are that you will come out ahead. Contrary to the gloomy prognostications of the shrill and fear-driven voices that create the ratings desired by media, buy and hold actually offers the best hope for average people to benefit from investing. Diversified index funds or ETFs provide a range of investments with low cost and low churn (which, itself, is expensive). The following ten investors offer inspiration for the buy and hold crowd.

Real Life Buy and Hold Legends

This are guys you’ve heard of. They are known for their riches — brought to them by their investing acumen. And they mainly got rich by following a buy and hold strategy. Interestingly, all of them are recognized for their philanthropy as well as for their wealth.

  1. 270px-warren_buffett_ku_visitWarren Buffet: The “Oracle of Omaha” is the well-known king of buy and hold. His company, Berkshire Hathaway, is known for acquiring companies that generally have strong fundamentals and long-term staying power. When Buffett acquires something, he tends to hold on to it. He is famous for deriding risky and opaque derivative investments when they were first introduced, prefering instead to keep with the boring strategy that made him a billionaire. However, Buffet doesn’t blindly buy and hold. He has been known to sell when circumstances warrant such a move.
  2. picture-1Charlie Munger: Munger is Buffett’s right-hand man at Berkshire Hathaway, and shares his investment philosophy. Even though it is doubtful whether Munger would be as famous as he is without his close association with Warren Buffett, Munger is a successful investor in his own right. Munger prefers to choose stocks that he knows well, and then hold them in his portfolio. Munger’s hero is Benjamin Franklin, and his book, Poor Charlie’s Almanack, is an homage to the well-respected founding father.
  3. benjamin_grahamBenjamin Graham: Represents the first investor to practice the art of “value investing.”  Graham was a hero of Warren Buffett’s inspiring him to adopt a buy and hold strategy based on investments that were high in value. Graham is the author of The Intelligent Investor, which came out in 1949 and is still considered one of the best works on investing. Many beginning investors use this book as a primer to help them formulate a solid, long-term strategy. Graham was a stickler for distinguishing between investment and speculation. And he was a proponent of index-based investing before index funds were invented. He died in 1976.
  4. 180px-johncbogleJohn Bogle: Invented the mutual fund in 1975. He is the founder of Vanguard, a company that offers a range of mutual funds, index funds and ETFs at a low cost. Bogle’s main investment strategy revolves around choosing low cost funds and hold on to them for the long-term. His book, Common Sense on Mutual Funds, is aimed at teaching ordinary investors to focus on long-term investing and avoid actively managed funds. Bogle has long made the case against actively managed funds, insisting that relying on fund managers is more expensive than it has to be, and that it limits your earnings.
  5. sir_john_templeton_2004Sir John Templeton: Using globally diversified mutual funds, Templeton became a billionaire. He was a well-known proponent of fundamental analysis, eschewing the technical analysis that short-term investors prefer. Templeton was one of the first investors to see the potential of Japanese investments. He was also very interested in preserving the distinction between speculation and investment, famously stating that “the stock market is not a casino.” He argued against high churn, warning that commissions and fees would deplete the earnings of those who traded frequently. Templeton was also know for his decision to renounce U.S. citizenship and avoid paying income taxes. He died in 2008.

Web Buy and Hold Legends

The buy and hold investing strategy has a lot of interest for online financial writers. While they may not be famous offline, here are some people you probably recognize if you frequent online financial circles.

  1. picture-2FMF: Free Money Finance regularly writes about a long-term investing strategy. Indeed, FMF has been rather forward in the past about using index funds instead of actively managed funds to build a better investment portfolio. FMF goes to great lengths to illustrate how the average investor can do well, on his or her own, by choosing low cost funds. His common sense approach to investing focuses on the long term, and avoiding short-term decisions that can sap yields through expenses, fees and commissions.
  2. smalljd_biggerJ.D. Roth: Roth is the author of Get Rich Slowly. He is an advocate of basic, reasoned investing. He is an admirer of funds, and has written about the advice offered by Sir John Templeton. The title of the blog, Get Rich Slowly, is meant to convey the idea of acquiring wealth over time, with a long-term strategy. He points out the following: “Not even the world’s most successful investors possess some magic secret. They stick to the fundamentals. They buy low and sell high, and they hold stocks for the long run. They’re not in the market for a quick buck. They’re willing to get rich slowly.”
  3. picture-6Ramit Sethi: Sethi is the author of the best-selling book I Will Teach You To Be Rich, related to the blog of the same name. Sethi focuses on asset allocation, and how picking stocks is not the way to build wealth through investing. Instead, he points out that you should concentrate on asset allocation, doing solid investment research, and creating a plan you can stick with. Choosing investments for the long haul, through reasoned asset allocation, rather than relying on stock picking, is the way Sethi encourages investors to behave. The whole idea is that becoming rich is something you can do — if you take the time to make wise investments.
  4. trentTrent: Trent is the brains behind The Simple Dollar. He encourages a simple, long-term investing strategy that leads to stability and wealth. Buy and hold is inherent to Trent’s investment philosophy. He frequently mentions John Bogle, and has praised Vanguard index funds. Trent is a major cheerleader for the use of index funds as a major (if not only) way to put together a good investment portfolio. He has an excellent introduction to how to start investing in index funds. If you are looking for straightforward ideas as to how you can manage your investments and build long-term wealth, The Simple Dollar is a good place to visit.
  5. picture-7Jim: Jim writes Bargaineering, a blog about “engineering a richer life.” He is a cheerleader for long-term, buy and hold investing that can help ordinary investors win in the long term. He offers a calm, rational and somewhat boring approach to investing, but it’s one that won’t keep you up at night, wondering if you’re about to lose it all. He is an advocate of using ETFs and mutual funds to empower yourself as an investor.