The Risk Behind Buffett’s Advice

Saturday, March 8, 2014

Warren Buffett’s investment advice echoes the long-term stock investors’ refrain: “Buy and hold.” Further, adopting academics’ (and Jack Bogle’s) beliefs, he advises holding an inexpensive S&P 500 index fund. That sounds easy. And, coming from the master, undoubtedly profitable. We only need to look at a long-term stock index chart to prove the wisdom and ease of following it. But wait…

About that long-term graph – it’s flawed. It lacks the two key adjustments needed to provide an accurate, historical picture. Without it, returns are overstated and risks, understated. Once done, the adjustments show a more complicated picture, one that raises doubts not only about Buffett’s advice, but also about any long-term strategy involving the stock market…

This article is published on Forbes.com

 

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