I’ve written a Guest Blog Entry for the Stock Trend Investing blog titled Long-Term Trend Investing.
Juicy Excerpt: There’s one big flaw to Buy-and-Hold, however. When stocks are overpriced, it can take a long, long time for investors to obtain the average long-term return of 6.5 percent real. The Buy-and-Hold advocates don’t like for investors to learn how long it can take for the average long-term return to apply. How does the idea of waiting 25 years to see a good return on your money sound to you? If you don’t have 25 years to sit around waiting for the long-term to arrive, you might want to consider taking a pass on Buy-and-Hold.
TR says
Just came on to your site. Looks interesting. Do you give methods for valuating stock? It seems like you are ciriticizing a lot of other strategies, but do you have anything for beginners, like a step by step guide of some sort?
Rob says
Thanks for your kind words, TR.
There’s really only one “strategy” that I am critical of — Buy-and-Hold. The problem is that Buy-and-Hold has been pushed so hard for so long that many people hardly think of it as a strategy anymore. Lots of people have come to think of it as divinely revealed truth. It’s not that.
The strategy I favor is Valuation-Informed Indexing. The difference is that, with Buy-and-Hold you stay at the same stock allocation at all times, letting your risk profile get wildly out of whack when valuations change. With Valuation-Informed Indexing, you make whatever allocation shifts you need to make to keep your risk profile roughly stable. This requires that you make one allocation shift every 10 years on average. But it is imperative that you make that allocation shift. Doing so permits you to obtain far higher returns at greatly diminished risk and to retire many years sooner.
There’s an overview of the material at the site available at the “About” section:
http://arichlife.passionsaving.com/about/
The most important tool is The Stock-Return Predictor. The Predictor essentially reveals the price tag for stocks. It tells you whether stocks offer a strong long-term value proposition at the current selling price or not:
http://www.passionsaving.com/stock-valuation.html
You may want to check out the recent research showing that Valuation-Informed Indexing has beat Buy-and-Hold in 102 of the 110 30-year time-periods in the historical record:
http://wpfau.blogspot.com/2011/01/valuation-informed-indexing-preliminary.html
Here’s a RobCast that describes nine VII portfolio allocation strategies:
http://www.passionsaving.com/personal-finance-podcasts-page-eighteen.html
I hope that helps get you started with this exciting, new, research-tested approach, TR. Please stop by again sometime.
Rob