Set forth below is the text of a comment that I recently put to the Joe Taxpayer blog:
No need to take the risk of executing market timing.
This sort of comment reveals a lot, in my assessment.
There’s RISK in long-term market timing? Huh?
Long-term market timing is price discipline. The risky thing is to exercise price discipline?
I see it just the other way around. I exercise price discipline with every single good and service I buy. Over the course of a lifetime, most of us spend more on stocks than on any other good or service we buy. And we are to agree NOT to exercise price discipline when buying stocks?
WHY? Why would anyone want to do that?
Wade Pfau sure didn’t think that exercising price discipline increased risk. That was the question he focused on in the research we co-authored. Over and over and over again, he wrote me to tell me that he was AMAZED at how much one could reduce risk just by being willing to exercise price discipline when buying stocks. He couldn’t get over it. Over and over and over again, he asked me: “Why has no one else researched this?”
We have found the freakin’ Fountain of Youth. And, instead of drinking from it, we have devoted 11 years of out lives to debating whether we should be permitted to hand out maps or not.
We should hand out the freakin’ maps! That’s my take.
If something goes wrong, people will hear about it. I am 100 percent sure.
But people need the maps to be able to check things out for themselves. And anyone who plans someday to retire has a right to know about the Fountain of Youth that lets him do that 5 to 10 years earlier — at less risk!
The risk is in FAILING to exercise price discipline, in my view. My take is that we all MUST exercise price discipline when buying stocks for there to be any hope whatsoever of the market continuing to function. How can a market function when a large percentage of the people are failing to exercise price discipline, when a good number actually believe that there is some sort of risk attached to exercising price discipline?
Wade searched far and wide for any study giving any reason to believe that there might be a downside to practicing long-term timing. He never found one.