I’ve posted Entry #73 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s titled Valuations Matter More for Indexers Than They Do for Other Investors.
Juicy Excerpt: For an index to provide an average long-term return of 6.5 percent real, it must provide returns far above that at times of low valuations and far below that at times of high valuations. Value Investors can escape the negative of buying at times of overvaluation by virtue of outstanding research efforts. Indexers don’t research. There is no such escape hatch available to them. Indexers who invest heavily in stocks at times of high valuations are doomed.