I have posted Entry #194 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Price Volatility Is Optional.
Juicy Excerpt: The graphic shows results from 1996 for an investor going with a 100 percent stock allocation and for an investor going with Treasury bills for that entire time period. The former investor was obviously taking on FAR more risk since he was invested in stocks rather than Treasury bills. And the former investor experienced FAR more volatility — the blue line dramatically goes up and then dramatically down and then dramatically up and then dramatically down while the red line in great contrast slopes gently upward for the entire time-period.
The results at the end of the day are precisely the same! Investors can obtain the same results without the craziness. Volatility is optional.
It is not only in this one 12-year time-period that this has been so. It has always been so. Here is a graphic making the same comparison for the entire time-period from 1871 forward.
x says
Investors can obtain the same results without the craziness.
If they perfectly execute a timing strategy which ignores trading costs and taxes, and is based entirely on data mining, they just might do as well as someone who practices buy-and-hold CORRECTLY (ignoring market swings.)
Hardly a compelling sales pitch. No wonder Bogle is rich and famous, and you’re, well, not.
Rob says
We disagree, X.
I wish you well.
Rob
Anonymous says
Retirees’ nest eggs built through buy and hold but no longer even in equities anymore are cotton candy nothingness.
Rob’s $500M future check is so real and tangible it deserves to be accounted for when discussing his net worth.
This makes perfect sense thank you Rob.
Rob says
If you get the money out of equities, then it is no longer cotton-candy nothingness. But how do you know when to get it out of equities if you are not willing to go by what the last 33 years of peer-reviewed research shows us? Short-term timing doesn’t work. Once you reject the exercise of price discipline, you are left with taking guesses and hoping to get lucky. With your retirement money. Huh?
The $500 million settlement check is backed by 33 years of peer-reviewed research, U.S. laws making financial fraud a felony, a Nobel prize, the effusive endorsements of HUNDREDS of our fellow community members and some of the biggest names in the field, and the co-authorship of a piece of peer-reviewed research that can fairly be described as the most important research published in this field in the past three decades. Yes, I somehow think that the collective power of all that combined will manage to bring me a settlement check of $500 million or a non-settlement award of an amount that is a big multiple of that number.
We’ll see, right?
I am not God. I could be wrong.
We will all find out together how things play out following the next price crash.
No?
I wish you the best of luck in all your future life endeavors, in any event. Hang in there, Anonymous.
Rob