I’ve posted Entry #16 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Seven More Rationalizations for Sticking with the Conventional Investing Advice.
Juicy Excerpt: If investing were a 100 percent rational enterprise, it is true that everyone would be looking at return predictions before setting their stocks allocations. But if investing were a 100 percent rational enterprise, stocks would never become overvalued in the first place; the rational thing would be for investors to set stock prices at their proper level. So this argument is circular. It posits that “If investors were 100 percent rational, none of us would need to take investor irrationality into consideration when setting our stock allocations.” That’s a true but pointless claim in a world in which investor irrationality is so great as to permit the sorts of stock prices we saw from 1996 through 2008.