Accidental Investing

On Bloomberg TV I just saw an add for Invesco showing a couple who supposedly did not look at their portfolio for nine years.  It showed their portfolio "blown up" due to "accidental" investing.  Their pitch was for "intentional" investing.  Is intentional investing better than accidental investing?

If we presume that accidental investing is long-term index buy and hold, we can make an evaluation of a $100,000 investment in the Dow Jones Industrial Average tracking Diamonds ETF (symbol DIA). 

Nine years ago, on 3/8/2004, DIA closed at 105.14. As I write, the DIA is at 143.51.  Adjusted for reinvested dividends, the DIA cost is $84.74 per share. 

Thus a buyer of 1000 DIA shares paid $105,140 plus commissions on 3/8/2004.  Today, that same investment, excluding dividends, is worth $143,510 less commissions.  Assuming $10 commissions on each side, that portfolio rose 39.12% (3.74% per annum) on price appreciation only.  If you include reinvested dividends using the adjusted cost, the total gain for over nine years totals 69.34% (6.03% per annum).

This is hardly a portfolio that blew up.  This is a portfolio that cost minimal commissions, had no capital gains distributions, paid dividends and performed admirably during a most turbulent time in our financial history. 

While other other investors may have done better or, more likely, worse during this period, I think it's clear that this basic buy and hold portfolio did not blow up.  If this past week when the Dow recovered all its losses from the 2009 collapse is not clear evidence of the superiority of buy and hold indexing than nothing is. 

While the jury may still be out regarding commodity indexing, I believe that commodity indexes will similarly outperform over the long term.