Set forth below is the text of a comment that I recently posted to another blog entry at this site:
You overestimate the amount of people who actually subscribe to buy and hold. It is only a smallish portion of all the money in the market and a depressingly low number of average adults implement it.
There is only one element of the Buy-and-Hold Model that is wrong, Anonymous. That’s the part that says that it is not necessary for investors to practice price discipline when buying stocks (that is, to practice long-term timing).
90 percent of investors fail to practice price discipline (long-term timing). If that were not the case, we could not possibly be at the price levels we are at today. Market prices are self-regulating so long as investors practice price discipline. We obviously are not regulating ourselves properly today.
What you are getting at is that many people do not implement OTHER aspects of the Buy-and-Hold Model. For example, many practice short-term timing, which the research shows doesn’t work. That makes things worse! The Buy-and-Holders only got one thing wrong (they didn’t say that it is necessary to always, always, always practice long-term timing). The fact that many investors don’t even implement the good aspects of Buy-and-Hold is just more evidence of how much emotion affects the stock investing project. The good aspects of Buy-and-Hold have stood the test of time for 50 years now.
When I say that I want to become known as the most severe critic of Buy-and-Hold who ever lived, I obviously don’t mean that I intend to criticize the many things that the Buy-and-Holders got right. If I were criticizing those things, I obviously wouldn’t have incorporated them into the Valuation-Informed Indexing model.
I am criticizing the failure of the Buy-and-Holders to correct the error that was uncovered by the peer-reviewed research 33 years ago. The harm done by that error cancels out all the good that would otherwise have been done by the many genuine powerful insights that the Buy-and-Holders have put forward.
Buy-and-Hold was rooted in something very, very, very positive. We all should be grateful that the Buy-and-Holders took us out of the Dark Ages. But they messed up when they became too proud to acknowledge a mistake. When you root your strategy in the peer-reviewed research, you must keep up with the research and make corrections in your initial, tentative thoughts as needed. This the Buy-and-Holders have failed to do for 33 years now. It is that refusal to acknowledge a mistake that is the focus of my criticism of what Buy-and-Hold has become in recent years.
Buy-and-Hold started as science. There is no one in the world who believes more strongly in the original vision of the Buy-and-Holders to turn investing advice into a science than does Rob Bennett. All of the work that I have done for 12 years is an effort to get Buy-and-Hold back on the right track, the track on which it was initiated. Bogle has betrayed that vision. I have remained true to it. If you go by what Buy-and-Hold stood for in the days when it was first advanced, I am the true Buy-and-Holder today and my good friend Jack Bogle is an imposter.
Buy-and-Hold, as originally conceived, is about research. It is not about death threats and unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. My Buy-and-Hold friends insult and degrade themselves and their investing strategy when they associate with individuals engaging in such abusive practices.
I believe in research-based strategies. I believe in what Buy-and-Hold once was and no longer is today. I believe in Valuation-Informed Indexing, the first TRUE research-based strategy. I believe in Buy-and-Hold CORRECTED to reflect the peer-reviewed research of the past 33 years as well as the research that came before Robert Shiller’s “revolutionary” (his word) finding of 1981.
I hope that helps a bit Anonymous.