I’ve posted Entry #178 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s callled I No Longer Believe That Buy-and-Holders Eventually Catch Up With Valuation-Informed Indexers.
Juicy Excerpt: I now believe that one of the factors that makes the 30-year and 60-year numbers look good is that they are the product of many years of compounding. What we may be overlooking is that even small differences in return percentages can translate into large differences in portfolio dollar values when many years of compounding are taken into account. At the end of 10 years, a strategy that yields an annualized return of 6.5 might not be all that much better than a strategy that yields an annualized return of 6.25. But at the completion of 60 years, the dollar value difference would be very large indeed.