White Paper: Buy-and-Hold Has Failed; Dividends Preferable

According to a white paper released by WBI Investments, “The Unconventional Dividend Based Investment Approach,” the strategy touted so much over the years to investors to buy and hang onto stocks within their portfolios is no longer valid – indeed, has caused substantial losses over the most severe of market downturns. Instead, what is needed, says the paper, is a return to an investment in dividend-paying stocks, which are in general less volatile and offer a more secure and regular rate of return than relying on increases in the share price of growth stocks.

WBI is an RIA firm based in Little Silver, New Jersey, where founder Don Schreiber is president and CEO.

Through the use of numerous graphs and charts, the paper demonstrates its assertion. First, the groundwork is laid with a chart that shows the market’s ten best- and worst-performing quarters over the past 55 years; another demonstrates what returns would be on a hypothetical portfolio if the investor had missed the ten worst or ten best quarters, both of those periods, or had ridden them all out with buy and hold. Another chart shows the length of up and down cycles in the Dow Jones Industrial Average (“Over the past century . . . these secular cycles have lasted 17 years on average.”) and further asserts, “Investors following the conventional buy and hold approach would have spent twenty-four years, much of their adult life, waiting to get back to even.”