Today, it has become trendy to declare that "buy and hold is dead."
Some critics regard dollar-cost averaging, or automatically investing a
fixed amount every month, as foolish.
Asked if dollar-cost averaging could ensure long-term success, Mr.
Graham wrote in 1962: "Such a policy will pay off ultimately,
regardless of when it is begun, provided that it is adhered to conscientiously and courageously under all intervening conditions."
For that to be true, however, the dollar-cost averaging investor
must "be a different sort of person from the rest of us … not subject
to the alternations of exhilaration and deep gloom that have
accompanied the gyrations of the stock market for generations past."
"This," Mr. Graham concluded, "I greatly doubt."
He didn't mean that no one can resist being swept up in the gyrating
emotions of the crowd. He meant that few people can. To be an
intelligent investor, you must cultivate what Mr. Graham called
"firmness of character" — the ability to keep your own emotional
Above all, that means resisting the contagion of Mr. Market's enthusiasm when stocks are suddenly no longer cheap.