I’ve posted Entry #370 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Biggest Problem With Buy-and-Hold Is the Questions It Takes Off the Table — Part Two.
Juicy Excerpt: When I was developing the retirement calculator, it occurred to me that it would be helpful for investors using it for me to include some features not included in the Buy-and-Hold calculators. My calculator permits investors to examine how the safe withdrawal rate changes in response to a lowering of the stock allocation. It permits investors to compare the safe withdrawal rate obtained by investing in stocks with the safe withdrawal rate obtained by investing in super-safe asset classes like Treasury Inflation-Protected Securities (TIPS). It permits investors to examine how much of a difference it makes to plan a retirement that is sure to have at least one dollar remaining in the portfolio at the end of 30 years (this is the assumption used in the Buy-and-Hold studies and calculators) versus one that is sure to have 50 percent (or some other percentage) of the starting-point portfolio amount remaining.
The questions examined in my calculator but ignored in the Buy-and-Hold calculators are important strategic questions. It amazes me that they have not been studied in depth for years. I have come to the conclusion that the reason why we have as a society held back for many years examining many important strategic investing questions is that our belief in the core tenets of Buy-and-Hold has put us in a frame of mind in which examining these questions seems pointless or even troubling.