I’ve posted Entry #49 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Paradigm Busting.
Juicy Excerpt: Valuation-Informed Indexing would be more popular if investors didn’t feel that they need to choose either VII or Buy-and-Hold. People would feel more comfortable taking a compromise choice somewhere between the two extremes. Unfortunately, no compromise is intellectually viable.
If the market is efficient, the Buy-and-Holders are right and the Valuation-Informed Indexers are wrong. If valuations affect long-term returns, the Valuation-Informed Indexers are right and the Buy-and-Holders are wrong.
I dislike dogmatism. But when it comes to numbers, it’s hard to get around the reality that there are right and wrong answers. Valuation-Informed Indexing is a paradigm-buster or it is a waste of time. Either it supplants Buy-and-Hold entirely or there is nothing to it.