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Say "NO" to buy-and-hold

Sunil Jhaveri (Mister Bond), MSJ Capital, Gurgaon

29th May 2017

Yesterday, Naren wrote a piece on WF where he discussed his belief that dynamic asset allocation funds are the most sensible strategies to guide clients equity allocations into at 31k Sensex levels (Click Here). Mister Bond follows this up today with an unequivocal message: say "no" to buy-and-hold, and say yes to discipline based rebalancing. As usual, he showcases hard data to support his claim that asset reallocation adds demonstrably more alpha into client portfolios than long term buy-and-hold strategies, and more interestingly, the gap in outperformance is only increasing over time.

Hello Friends,

Let me start with a Quotable Quote by Yours Truly (MisterBond):


So if we become a little realistic & not get carried away by the emotions & biases of our Investors; we will be able to guide them better on their Wealth Creation exercise. Markets are at an all-time high - but only in terms of a Number. There is huge euphoria & domestic investors are flocking with tons of liquidity. Is this sustainable? What should be the way forward?

Solution is adopting Asset Reallocation strategy in their portfolios for Equity Investments

However, there are many detractors of Asset Allocation strategies v/s Buy & Hold strategy. Proponents of Buy & Hold strategy want us to believe that over longer periods; this strategy out performs Asset Allocation strategies & one just needs to invest & hold for long term.

However, my analysis (based on my own Algo) shows some startling revelations contrary to the beliefs of Buy & Hold Strategy proponents. I have applied my Algo on Sensex over different time horizons & compared the same v/s investing in Sensex over the same time horizons & holding it for long periods of time. Here are the results

  1. As can be seen from the table below, in almost all cases except for 2 years where One Time Investment has outperformed (that too marginally) investments through Asset Reallocation strategies. In all other instances, out performance of Asset Reallocation strategies v/s one time investment is humongous

  2. Another noticeable observation is longer the period, out performance of Asset Reallocation strategies is improving v/s one time investment; thereby proving the detractors of Asset Reallocation strategies wrong

  3. In short, over shorter durations, one time investment (like the current bullish market period) may look to outperform Asset Reallocation strategies; it will be prudent to have caution in such times of euphoria


So the conclusion is that we should:

  1. Sensitize Investors to Market Signals even before on boarding them into Investment Process

  2. Ideal way to invest in Equity as an asset class is through Asset Reallocation strategy either by using some valuation Matrix like MisterBond's Algo or through re balancing schemes in the Mutual Fund space

  3. Those who wish to subscribe to the Algorithm & Calculator of MisterBond can log onto & subscribe to the same

  4. This will add Fundamentals to Equity Investing & Disinvesting along with a dash of Logic & Common Sense as was mentioned in the Quotable Quote of MisterBond

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