Being dead may be an advantage when it comes to investing. And being dead is kind of the investing equivalent of the ultimate buy and hold investor.

John Rekenthaler Morningstar Vice President, Research

Morningstar guru John Rekenthaler seems skeptical about references to a possibly-apocryphal internal performance review (or released study) from Fidelity that found that between 2003 and 2013, investors with the best performance were "either dead or inactive." Yet Rekenthaler suspects that the results of the rumored research are on the money, because he believes in buy-and-hold for most investors.

Most fundsters are familiar with the two main ideas Rekenthaler discusses: that investors who regularly trade in and out of different stocks end up worse off on average because they pay higher total trading costs since they're trading more; and that investors who try to time movements between asset classes tend to mis-time their reallocations, buying high and selling low. Yet Rekenthaler's discussion of the arguments is worth a read. It's a welcome reminder for fundsters, be their funds active or passive, that most investors are betting off sticking to a strategy and making as few changes as possible.

As a bonus, the column may also provide fuel for fundsters needing to remind investors or advisors of the importance of buy and hold. After all, investors don't want their best performance to be after they're dead. 

Edited by: Neil Anderson, Managing Editor


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