I’ve posted a Guest Blog Entry at the Balance Junkie site called What Bogle Says About Valuation-Informed Indexing.
Juicy Excerpt: The purpose of this post is to describe and comment on Vanguard Founder John Bogle’s views on Valuation-Informed Indexing. Bogle is widely recognized as the primary advocate of Buy-and-Hold alive on Planet Earth today, as I am the primary advocate of Valuation-Informed Indexing. The surprising truth is that, despite common misperceptions, the two of us are not all that far apart in our investing views!
Juicy Comment #1: To me, Bogle’s remarks are cryptic and vague. It does him injustice to speculate what he is really thinking. Would he not be interested to explain these remarks more fully if asked?
Juicy Comment #2: Regarding some ‘buy and holders’ with whom I have engaged they don’t necessarily completely practice what they preach. They do in fact take advantage of market downturns to time their rebalancing of their asset allocations and when confronted they get angry and say it’s just common sense!
Juicy Comment #3: I don’t think I’m smart enough to know when stocks are at fair value and when they’re at double fair value.
Juicy Comment #4: VII is as much John Bogle’s creation as it is Rob Bennett’s creation. All I did to develop VII was to take Buy-and-Hold and drop out the Get RIch Quick stuff (Bogle did not know it was Get Rich Quick stuff at the time he adopted it because the research showing this had not yet been done at the time). VII is going to permit all middle-class investors to retire five to ten years sooner than they can hope to today. It is a huge advance. And Bogle is going to get a huge portion of the credit for it. I am going to see to it.
Juicy Comment #5: As you note, even the Buy-and-Holders see that Buy-and-Hold does not jive with common sense. So, just as you say, they make a million exceptions to the “rules” of the Buy-and-Hold approach. You’ll note that Buy-and-Holders never object to people who don’t follow the rules. It doesn’t bother them. Why? Because those people are not pointing out that there are no studies. So they represent no threat. It’s the people who take Buy-and-Hold seriously and ask to see the studies that are trouble.