I’ve posted Entry #136 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Wall Street Doesn’t Benefit from the Promotion of Buy-and-Hold.
Juicy Excerpt: It’s not so much that Wall Street wants people always to buy stocks. It’s that Buy-and-Hold possesses a powerful intuitive appeal, especially during bull markets. Valuation-Informed Indexing is the first true research-based strategy and there is now a mountain of evidence showing that it is superior to Buy-and-Hold in every possible way. But investors don’t take to it easily. So it is a hard sell. Wall Street wants to please its customers. So it pretends not to know about the mountain of research pointing the other way and continues to make the easy pitch for Buy-and-Hold.
The distinction is important. If Shiller’s investing ideas prove out, we are going to see another stock crash sometime over the next few years. Investors are going to be angry. They are going to be looking for people to blame for their losses. If the idea takes hold that Wall Street continued to push Buy-and-Hold for purely financial reasons, things could get ugly. To the extent that it is possible to offer explanations for what has happened that will help to diffuse that anger, we should be doing that.