Analyzing the Russian Stock Market: The Flaws of Buy-and-Hold Strategy

Many financial bloggers and investment literature promote the buy-and-hold strategy, suggesting that purchasing a broad market index and holding it for years will yield positive results due to time and compound interest. But is this truly the case? This article examines a straightforward buy-and-hold approach, where an investor buys an index once and does not make any further transactions for several years. I analyzed actual stock index data to illustrate how investments perform based on the year of purchase over a 25-year horizon. For the U.S. market, I utilized the S&P 500 index, which has historical data available since 1871. For the Russian market, I initially aimed to use the Moscow Exchange Total Return Index (MCFTR), but since it has data only from 2003, I opted for the Moscow Exchange Index (IMOEX), which has records dating back to 1997. All calculations and methodologies are available on my GitHub for those interested in verification. Initially, I believed that the buy-and-hold strategy might work well in the U.S. due to the abundance of investment literature, but can Warren Buffett's principles be applied to the Russian market?