Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Uh oh, Rob. ESI Money is targeting you. He believes financial experts should publish their net worth and financial education showing their own success in following the advice they give.
https://esimoney.com/dont-publish-net-worths-financial-experts/
He says what you say, Anonymous. Then below that he says that advisors should also tell HOW they made their money. He points out that some might make a lot of money as the result of some short-term project and then lose it; he says that it is the long term that matters. That’s what I believe.
If an advisor endorses Buy-and-Hold strategies and claims that he had made money with them, does he tell how much of what he made came post-1996, when the promotion of Buy-and-Hold strategies caused prices to rise to dangerous and unsustainable levels? Should the people who are listening to the fellow’s investing advice be counting the cotton-candy nothingness part of his portfolio as real wealth or should they be adjusting his numbers to show how much wealth he has accumulated when his wealth is measured REALISTICALLY?
You know what I think, Anonymous. Anyone who doesn’t make an adjustment for valuations is either uninformed as to the last 36 years of peer-reviewed research or is flat-out working a con on people, hoping that they will accept the nominal, unadjusted numbers as real. The reason why I am a big believer in using the peer-reviewed research as guidance is that the peer-reviewed research cuts through the cons, it exposes the con men (whether they are suffering from cognitive dissonance or not — most are, but still…) for what they are.
I favor investing strategies that work longer than a single bull/bear cycle. Why? Because we all invest for longer than a single bull/bear cycle. The typical bull/bear cycle lasts 35 years. Most of us invest for roughly 60 years. Valuation-Informed Indexing TROUNCES Buy-and-Hold over 60-year time-periods. It’s not even remotely a close call. The risk is far, far less and the returns are far, far greater.
People should indeed look at whether advisors are able to create wealth for themselves. But they need to be careful not to be fooled by the smelly bull market garbage. They need to look at real numbers. They need to turn to peer-reviewed research for guidance. They need to cut through the cons that have come to dominate the investing advice field in the Buy-and-Hold Era. The wealth that matters is the wealth that lasts for the long term. For lasting wealth, you want to go with the first true research-based strategy and run, not walk, from those pushing the pure Get Rich Quick approach.
My sincere take.
Rob
Anonymous says
Number of independent 60 year modern stock market periods? 1, 2 if I’m being generous. Kind of like seeing one green car, and determining all cars are green.
Rob says
There’s only ONE 147-year time-period from 1870 forward, Anonymous. Valuation-Informed Indexing trounces Buy-and-Hold over that 147-year time-period too.
The story is that VII trounces Buy-and-Hold for ALL except short-term periods. Buy-and-Hold can indeed trounce VII for short-term time-periods. That’s what you’ve got going for you. The Madoff fund had that! Saint Bernie was a winner until the day his investors lost everything!
VII is slightly ahead from 2000 forward. It doesn’t trounce BH as of today. But it will once prices return to fair-value levels. So even over 17 years, VII is ahead.
BH is slightly ahead if you count from 1996. But not on a risk-adjusted basis.
It’s not ONLY 60-year time-periods for which VII is always ahead. It is always ahead for 50 years and for 40 years and for 30 years and for 70 years and for 80 years and for everything else.
In the short-term, BH can sometimes go ahead. But so what? You’re not investing for the short-term, are you?
You say that there are only two 60-year time-periods and that that’s not enough to go by. Okay, are you then willing to ignore all historical return data when deciding how to invest? You are investing for a 60-year time period! If what happens at 60 years means nothing, then there is no meaningful data for you. If you live a normal life, you are going to get to 60 years or close to it. So that is what matters regardless of how many 60-year time periods we have data for.
You obviously can do what you please. But the objective reality is that VII has been trouncing BH for all long-term investors ever since the U.S. stock market opened for business. If you are hoping for the opposite to happen this time, you are hoping for something that has never happened before. You are allowed. But please forgive me if I elect to invest my retirement money according to the strategy that has prevailed in every long-term time-period for which data is available rather than the strategy that has failed in every long-term time-period for which data is available.
Call me madcap, you know? I am not sure that I get the thrill that for you Goons comes with investing pursuant to the loser strategy and then looking for picky points to justify the decision to do so. You are allowed to change your strategy before you lose your money, you know? There’s no law that says you cannot switch from the losing side to the winning side.
I don’t believe that you will switch. But I wish you would. I am your friend and so I naturally wish that you would. But it is of course your call all the way, my feverishly rationalizing friend.
Rob