The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails

The Danger of Warren Buffett

Warren Buffett is the eternal counterbalance to anyone who suggests that something might be wrong with buy-and-hold investing. The great stock investor makes buy-and-hold investing seem easy and natural—which it is, provided you pick the right stocks to buy-and-hold.

The truth is that even the Sage of Omaha sells stocks, trims investment positions, and, otherwise, changes his mind. His penchant for quotable one-liners, such as “Forever is his favorite investment period,” burnishes his well-deserved halo and blurs the facts. Buffett says very little about selling stocks or bad investment decisions. He leaves that to regulatory documents that his company, Berkshire Hathaway, files with the Securities and Exchange Commission. Those reports are much drier and harder to read than his shareholder letters the financial media loves to hype.

The truth is that buy-and-hold investing is not as easy as it seems. The idea is widely misunderstood by most people, and very poorly applied.

Ideally, every time you sell a stock you will be like Bernard Baruch, who captivated the country after the Great Crash of 1929. He was another generation’s Warren Buffett. Baruch attributed his success in the stock market to selling when stock prices were rising. Baruch sidestepped the Great Crash of 1929 and went on to serve as an adviser to presidents Woodrow Wilson, Franklin Delano Roosevelt, and Harry Truman.

“Men find it equally hard to take either a profit or a loss,” Baruch ...