Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
So your argument is that buy-and-hold doesn’t work because no one buys and holds.
This is the logical fallacy known as “begging the question”, attempting to prove a point by simply restating your premise. It is a form of circular reason. Most people incorrectly use “begs the question” when they mean “raises the question”.
Just wanted you to learn something new.
It’s true that investors are not capable of buying and holding and that the Buy-and-Hold strategy cannot work until investors become capable of following it in the real world. Do you know what would make investors capable? Permitting honest posting on the last 36 years of peer-reviewed research! Stocks prices are self-regulating if investors are capable of accessing the information they need to access to act in their self-interest. The problem for all of us is that darn Ban on Honest Posting, the death threats and all the rest of it.
If investors have access to honest and accurate reports on the last 36 years of peer-reviewed research, you are not going to see any more bull markets. Prices would just always remain near fair-value levels (a P/E10 of 15). So there would be no need to change your stock allocation. Sticking with the same stock allocation is Buy-and-Hold, no? Is that not the basic idea, learning from the peer-reviewed research and always sticking with the same stock allocation?
Valuation-Informed Indexing is just Buy-and-Hold more fully developed. We didn’t know all there was to know about how stock investing works back in the late 1960s, when Buy-and-Hold was developed. In 1981, we clicked that last oh-so-important piece into place. Now we know. Intellectually. But 90 percent of us do not know the realities emotionally. For the remaining 90 percent of us to catch up with the Valuation-Informed Indexers, we would need as a society to act to open every discussion board and blog on the internet to honest posting. That’s how we spread the word. It is only by spreading the word re the last 36 years of peer-reviewed research that we can bring the 90 percent of investors still living in the world of 1980 up to speed.
We are not on different sides, Anonymous. Your first mistake was to assume that, because I was telling you something new, I was your enemy. Science is a quest for truth. When Bogle maden it a cardinal principle of Buy-and-Hold that investing should be rooted in realities revealed through the peer-reviewed research, he made it a cardinal principle of Buy-and-Hold that Buy-and-Hold would CHANGE over the years as new realities were revealed.
This is why I call those who post in “defense” of Mel Linduaer “Lindauerheads” rather than “Bogleheads.” If they were truly Bogleheads, they would be in favor of permitting honest posting on the last 36 years of peer-reviewed research. I am 10 times more of a Boglehead than Mel Linduaer is. Lindauer is a Lindaurhead, not a Boglehead. Now, the sad reality is that Jack Bogle himself is today more of a Lindaurhead than a Boglehead. That one is a strange twist. But in fairness to Lindauer, I think I have to acknowledge that that is the reality today. But I am still a proud Boglehead. I love the Jack Bogle who argued in his books that investors should root their investing strategies in the peer-reviewed research, not the one who allows his name to be used at a board at which the sorts of individuals who have put up posts in “defense” of Mel Lindauer are permitted to post.
It makes no sense to encourage investors to adopt Buy-and-Hold strategies while denying them access to the discussions of the last 36 years of peer-reviewed research that they need access to to be able to follow Buy-and-Hold strategies effectively for the long term.
That’s my sincere take re these terribly important matters, in any event.