Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“If you had asked Buy-and-Holders in 2000 what the annualized real return would be for the next 18 years, not 1 in 100 would have said “2.25 percent.” Stocks have not been performing in the manner in which Buy-and-Holders say they should always perform for a long, long time now.”
I don’t know of anyone that only made their investment in 2000 and then immediately withdrew all their money after a crash. Buy and holders invest all the time and then withdraw money over a long period of time. To date, there has NEVER been a 30 year period in which a 4% withdrawal rate failed.
I agree that Buy-and-Holders invest all the time and then withdraw money over a long period of time. The question that has been on the table for 15 years now is — Is it better to take the price at which stocks are selling into consideration when doing that or is it better to ignore price? I believe that it is better to take price into consideration.
I obviously agree that there has never been a 30-year period in which a 4 percent withdrawal rate failed. The question that has been on the table for 15 years now is — What were the odds that retirements calling for a 4 percent withdrawal rate that began in January 2000 would survive 30 years? The historical data shows that those retirements had only a 30 percent chance of surviving 30 years. Those were high-risk retirements, not safe retirements. Why not tell people that?
It all comes down to whether the market is efficient or whether valuations affect long-term returns. A belief that the market is efficient takes you down one road and a belief that valuations affect long-term returns takes you down a very different road. I believe that valuations affect long-term returns. Is that okay by you, Anonymous? Should I have to ask “pretty please” before posting my sincere views on stock investing because you happen to hold different beliefs?
If so, why? Why do you get to dictate what people say about stock investing on the internet? People post their honest views on hundreds of different subjects on the internet every day and there is no big fuss made about it. Why is stock investing the one big exception? Why do you feel so strongly that everybody has to either believe in Buy-and-Hold or at least pretend to believe or at least keep his or her mouth shut? It is my belief that Buy-and-Hold is DANGEROUS. Is there some reason why I shouldn’t tell my friends that given that that is my sincere belief and given that this is a research-based belief and given that the consequences of getting this stuff wrong can be pretty darn dire (especially for those opting for early retirement)?