I’ve posted Entry #28 for my weekly Valuation-Informed Indexing column at the Value Walk site. It explains why Wade Pfau’s research understates the superiority of Valuation-Informed Indexing over Buy-and-Hold.
Juicy Excerpt: We have seen three secular bull market in the historical record. The average price drop that followed (from the high point to the low point) was 68 percent. The average 20-year return following the bull top was 0.7 percent (including dividends). It is exceedingly unlikely that more than a tiny percentage of Buy-and-Holders stuck with their high stock allocations through so many years of financial pain and yet any investors who sold obtained worse results than the results than caused Buy-and-Hold to come up short in 102 of 110 of the 30-year periods in the historical record.
Valuation-Informed Indexers do not experience the same difficulty sticking to their planned stock allocations because Valuation-Informed Indexers go with far lower stock allocations at times when stocks are priced to crash (times of high valuations). So failing to consider the reality that most Buy-and-Holders are forced to sell when prices crash slants things in favor of Buy-and-Hold.