Set forth below is the text of a comment that I recently put to the discussion of a blog entry at this site:
If you predict something twelve years too soon, have you really predicted anything?
Thank you for asking an intelligent and important question, Trevor. I believe that there are millions of middle-class people who experience precisely the doubt you are evidencing by asking this question.
The reality here is counter-intutive. It seems like the answer might be “no.” It seems like predicting something 12 years too soon is not doing something terribly useful. But what seems is not always what is. The answer to the question is “yes,” you are doing something amazing by being able to predict something 12 years in advance.”
The best way to see why this is such a big deal is to experience it for yourself. Please go to the Scenario Surfer:
http://www.passionsaving.com/portfolio-allocation.html
Run through some 30-year returns sequences. What you will find is that over and over and over again you will see yourself “predicting” a crash years before it comes. And, if you lower your stock allocation as you should, over and over and over again you will find yourself far, far ahead of the Buy-and-Hold portfolio in the long run. You will obtain FAR higher long-term returns while taking on DRAMATICALLY reduced risk. There will be some cases (not the norm) when your portfolio value at the end of 30 years will be more than DOUBLE the size of any of the three (20%, 50% and 80%) Buy-and-Hold portfolios.
What you are seeing here is the power of compounding returns applied to investing. When you lose money in a crash, you lose not only the numbers of dollars you lose directly in the crash. you also lose DECADES of compounding on those returns. The losses are so large that the human mind can barely process the information.
Valuation-Informed Indexers NEVER experience those losses. Not once in 140 years have they experienced those losses. But every Buy-and-Holder HAS experienced them. There has never been an investor who lived a normal lifetime of 80 years or so who did not experience at least one crash in his investing lifetime. So every Buy-and-Holder has been hit in a very hard way that not a single Valuation-Informed Indexer has ever been hit.
As a truly great and kind man was often known to say –
Have fun!
Rob
Sanity says
Your strategy, to the extent that it’s even possible to discern what it is, is based entirely on data mining. Predicting the market will behave a certain way, solely because it behaved that way 30 or 80 years ago, is simply not useful.
Rob says
That’s not so, Sanity.
Valuation-Informed Indexing is based on common sense. There is no product or service that one can buy where the price you pay does not affect the value proposition obtained. It’s true that the 140 years of historical return data available to us CONFIRMS what common sense tells us must be so. But Valuation-Informed Indexers don’t start with data. We start with common sense.
The problem here is that the Buy-and-Holders do NOT start with common sense. It is the Buy-and-Holders who permitted data to trump common sense. Unfortunately, they misinterpreted what the data says when they were putting their strategy together. They made a mistake. As a result of that mistake, they made Buy-and-Hold the purest and most dangerous Get Rich Quick scheme ever concocted by the mortal mind instead of the first research-based strategy, which was their initial intent.
Valuation-Informed Indexing corrects the mistake. Valuation-Informed Indexing is the first true research-based strategy. VII is superior to the purest and most dangerous GRQ scheme ever concocted by the human mind in every possible way.
That’s why the Buy-and-Holders have been forced to resort to death threats and board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. It’s pretty darn hard to “defend” a research-based strategy that has precisely zero research supporting it. Yikes!
Yes, all of the research and all of the data supports VII. But, no, by no means whatsoever is that all that VII has going for it.
I wish you all good things.
Rob
The Pink Unicorn says
Rob,
I can show you my returns based on my buy and hold strategy. Can you do the same with your investments? Let’s compare.
Rob says
You could show me 20 copies of your returns and that wouldn’t persuade me to join you in your ongoing acts of financial fraud, Pink.
I think you’re going to have to try to find someone else.
I wish you all good things.
Rob the Non-Criminally Inclined
Sanity says
“Common sense” is subjective. When the Dow hit 6400, thousands of highly paid investment pros screamed “sell” and thousands more “buy”. Same is true today. And I guarantee every one of those pros believe they have above average common sense.
Bogle says he knows of no one who can time the market, either short term or long term, no matter what strategy they use. Which is why buy-and-hold is the best choice for the individual investor. I guess that makes him a goon.
Rob says
Bogle isn’t a Goon to support Buy-and-Hold. There are millions of good and smart and hard-working people who support Buy-and-Hold. I was a Buy-and-Holder myself on the morning of May 13, 2002. So was John Walter Russell. Wade Pfau was a Buy-and-Holder when he first contacted me about working with him on his research projects. I today believe that Bogle is wrong about this. But I also believe that it is critical that he express his sincere views and all signs are that he is sincere in his belief in and support for Buy-and-Hold. So my good friend Jack is helping us all out when he makes the case for Buy-and-Hold.
Jack DOES play the role of the Goon when he puts up posts supportive of Mel Lindauer and John Greaney. There is no place in this field for death threats or for unjustified board bannings or for tens of thousands of acts of defamation or for threats to get academic researchers fired from their jobs.
Whether Jack’s role in supporting Lindauer and Greaney amounts to criminal behavior or not is for a jury to decide. Testimony will be taken under oath and and we will see how things go.
I intend to testify honestly. I am going to say that I never could have accomplished what I have accomplished over the past 11 years without Jack’s help. He built the foundation for Valuation-Informed Indexing. And it was his book that taught me what I needed to know to see that the Old School safe withdrawal rate studies got the numbers wildly wrong. I will also testify that I have contacted Jack four times re the Lindauer matter and that he has not yet taken effective action.
I wish you all the best things that this life has to offer a person, Sanity.
Rob the Huge Jack Bogle Fan
The Pink Unicorn says
Rob,
It seems that so far, you are the only fraud on here. The difference is that I can back up what I say with facts. We have yet to see you do the same.
Rob says
Good point, Pink.
Don’t let the bad guys get you down, man.
Rob, Who Acknowledges a Good Point When He Sees One
The Pink Unicorn says
Don’t worry, Rob. I never let YOU get me down.
The Pink Unicorn says
Rob,
Still waiting to see your financials. Credibility comes from results.
Rob says
Don’t worry, Rob. I never let YOU get me down.
That makes me happy, Pink.
My intent is to add something positive to every life I touch and to never add a negative to a single person who reads my words.
Rob the Bad Guy (in the Minds of Some)
Rob says
Still waiting to see your financials. Credibility comes from results.
If 140 years of historical data is not enough to persuade you of the superiority of Valuation-Informed Indexing over Buy-and-Hold, you are emotionally addicted to Get Rich Quick and there is nothing that could possibly convince you. Your pain is not rooted in any intellectual deficiency. It is 100 percent emotional in nature. So there is no intellectual content that I or anyone else can put forward that would help.
Rob the Caring (Although the Goons Question Even This)
The Pink Unicorn says
Market timing is get rich quick, Rob. I have facts to back me up. I am happy to share my numbers. You have been asked to do the same. What do you have to hide? If anything, your strategy is emotional. But and hold is not. All one has to do is watch your videos to see intellectual deficiency.
STILL WAITING FOR YOUR FINANCIALS!
Rob says
Market timing is get rich quick, Rob.
Short-term market timing is Get Poor Quick, Pink.
Long-term market timing is paying attention to price when you buy stocks. It is a 100 percent logical impossibility that any strategy that did not include paying attention to price could ever work for a single long-term investor, just as much as it is a 100 percent logical impossibility that a car-buying strategy or a banana-buying strategy that does not call for the exercise of price discipline could ever provide good long-term results.
Anyone who tells you different is a Wall Street Con Men. It may be that those who tell you different are not aware that they are working a con. There is a mountain of evidence that most who promote Buy-and-Hold are suffering from cognitive dissonance. The objective reality remains that there is precisely zero support for this “strategy” in the historical return data and in the past 32 years of peer-reviewed academic research.
Rob the Research-Informed
Rob says
your strategy is emotional.
I’m the one who put forward death threats.
I’m the one who demanded unjustified board bannings.
I’m the one who advanced tens of thousands of acts of defamation.
I’m the one who threatened to send defamatory e-mails to an academic researcher’s employer with the aim of getting him fired from his job.
I forgot.
Rob, the Fellow With a Poor Memory
Anonymous says
Rob
You are giving me an ice cream headache. Ouch!
Seriously, do you ever discuss your internet activities with your real-world friends and family? What is their reaction? Has anyone of them ever told you that you need to get a grip?
What do your kids say when you tell them you are too busy trolling the internet to spend real time with them?
Trebor Martin
Rob says
What is their reaction?
The two most common reactions are:
1) The glassy-eyed stare that makes it clear that the person is tuning out what is being said. Often the person giving me the glassy-eyed stare offers some words of encouragement with the aim of being polite. But the glassy-eyed stare tells the true story, in my assessment; and
2) Some sort of cynical observation that “of course Wall Street is ripping off the little guy.” I don’t find this reaction terribly helpful either because it is an over-simpification of the reality that has evidenced itself over the past 11 years. Yes, money plays a role in the 11-year cover-up of the errors in the retirement studies. But the primary problem is that people do not understand the realities. It is fair to say that the investing advice field is today 100 percent corrupt. But it is important to add that there are many smart and good and hard-working people in this field who do not WANT the field to be 100 percent corrupt and who long for the day when the internet is opened to honest posting so that we can all engage in a learning process together and thereby overcome both the corruption and the economic crisis that followed from it.
Rob the Non-Cynical
Rob says
Has anyone of them ever told you that you need to get a grip?
I have had numerous people advise me to give up my effort to open the internet up to honest posting on safe withdrawal rates and many other critically important investment-related topics.
Never once has anyone suggested that I was the cause of the problem. In every single case in which I have discussed what has happened, the other person has been appalled to learn of the tactics employed by the Lindauerheads and the Greaney Goons and by the failure of the site owners and the investing “experts” to take effective action.
Rob the Equally Appalled
Rob says
What do your kids say when you tell them you are too busy trolling the internet to spend real time with them?
Both of my boys understand that valuations affect long-term returns, Anonymous. Both of them get it that Buy-and-Hold is a big pile of smelly Wall Street mumbo jumbo. They both caught on to the basic idea when they were about five.
Neither of my boys has money invested in the market. So neither of them suffers from cognitive dissonance as a result of having been taken in by a con. That’s what gives them their edge.
Rob, the Proud Parent of Two Young Boys Who Understand Stock Investing a Lot Better Than Jack Bogle
bannwd plop contributor says
“Neither of my boys has money invested in the market. So neither of them suffers from cognitive dissonance as a result of having been taken in by a con. That’s what gives them their edge.”
Two more hot dog vendors on the way.
Rob says
You sound confident of your investing strategy, Banned.
Rob the Kidder