Set forth below is the text of a comment that I recently poster to another blog entry at this site:
Perhaps you feel your VII is superior but in that case shouldn’t buy and hold simply be seen as sub-optimal not broken and never capable of working.
I believe that Valuation-Informed Indexing is superior to Buy–and-Hold. It always either increases return or decreases risk.
This can be tested with The Investor’s Scenario Surfer. In the hundreds of tests I have run, VII ha produced higher 30-year returns in 90 percent of the cases. In the other 10 percent, Buy-and-Hold produced higher returns. But there is obviously more risk with a strategy that only works in 10 percent of the possible scenarios. So I think it is fair to say that VII always produces better risk-adjusted returns.
You say that some people have been able to retire using Buy-and-Hold. Stocks are an amazing asset class. It’s hard to come up with a strategy that is so bad that not one person using it would be able to retire. There are people who put all their money in lottery tickets who end up being able to retire. I see that as too low a bar. If one strategy ALWAYS produces lower long-term risk-adjusted returns than another, I think it is fair to say that it never works. The aim of an investing strategy is to produce HIGHER returns with LESS risk. Buy-and-Hold hurts you in both departments.
I of course have zero objection to the idea of people USING Buy-and-Hold because they personally find appeal in it. Those who like it should of course use it. But they should not make exaggerated claims for it. They should just use it and be happy that they have something they like to use.
If they know what they are getting into, there is no reason why they should be angry that others use other strategies. That’s what I see with you Goons — you are ANGRY that others use Valuation-Informed Indexing. That’s a very bad sign, in my assessment. Anger is a negative emotion. If using Buy-and-Hold is making people angry, there is something very wrong with Buy-and-Hold.
I pick up from your comments that Buy-and-Hold is being pushed for MARKETING reasons. The idea seems to be — This is good enough for all the investors who are not capable of gaining sufficient control over their emotions to follow a Valuation-Informed Indexing strategy. I see this as a chicken-and-egg thing. EVERYONE is capable of following VII strategies successfully so long as they hear about them frequently. It’s because they don’t hear about them often that the ideas cause confusion.
In any event, no one has a right to use abusive strategies to stop people from learning about a strategy they might like. If people want to push Buy-and-Hold as the strategy that is good enough for people who would have a hard time following a VII strategy, that’s fine. But it is up to the investors to decide for themselves which category they fit in. Everyone has a right to promote VII strategies at every discussion board and blog on the internet. Just as everyone has a right to promote BH strategies at every discussion board and blog on the internet.