I have posted a Guest Blog Entry at the Invest It Wisely site called The Biggest Unknown Risk of Stock Investing.
Juicy Excerpt: My strong sense is that most investors have not thought through carefully what it means to stick with stocks for the long run. To try to stick with stocks for the long run and fail to do so is the worst of all possible worlds. The possibility of becoming a failed Buy-and-Hold investor is the biggest unknown risk of stock investing.
Juicy Comment #1: I agree that investors should think through these numbers. One problem is that it is extremely difficult to carry out the approach. When P/Es are high it looks like the world has changed and it is by definition following a period where it has been very easy to make money in stocks. 2000 is a perfect example.
Juicy Comment #2: Could you please share the code for your regression analysis? I would like to replicate/critique it.
Juicy Comment #3: I buy when the stock market is down and I buy when it is high. I tend to follow Buffet’s approach.
Juicy Comment #4: Times of high pessimism make for great long-term returns. Times when euphoria is running high means lower future returns.
Juicy Comment #5: So it isn’t buying and holding that you are against it is the common eduction piece that goes along with it?