Set forth below is the text of a comment that I recently put to another blog entry at this site:
Roger Wohlner, owner of the The Chicago Financial Planner blog: Rob, interesting stuff, but it doesn’t address my question. Can you point to investment results in the real world supporting the valuation approach to investing you advocate? Is their somebody actually achieving superior results using this approach?
Here are some people who I would talk to if you want to talk to real live people who have followed valuation-informed strategies and who obtained good results from doing so:
1) Rob Arnott — He told me that my ideas on investing are “sound.” I am sure that Rob has clients who follow his advice. He would have many more of them if academic researchers felt free to do research showing how successful his strategies are. Rob told me that two young researchers who wanted to do research on his ideas were taken aside and warned that they would be doing damage to their careers if they published such research. That’s the problem that I am always talking about. But if all you are looking for is people to say “I did this and it works,” I am confident that Rob can give you names of people to call.
2) Robert Shiller — Shiller is of course the grandfather of Valuation-Informed Indexing. He has some sort of financial advisory business now in addition to his academic work. He could point you to people. Like Rob Arnott and myself, Robert Shiller has faced pressure from Buy-and-Holders to keep it zipped. He has referred to these pressures in oblique ways in a number of his public comments. I have a theory that Shiller may have already written a follow-up to “Irrational Exuberance” in which he spells out the practical, how-to implications of his research findings and that he is just waiting until after the next price crash to publish it because he believes that it will get a better reception at that time.
3) Bogleheads Forum Posters — I met a good number of people at the Bogleheads Forum who follow valuation-informed strategies. People would say things like “I have been doing what Rob advocates for many years and obtaining very good results.” It would be nice if you could just go to the forum and ask for people who have followed this strategy to identify themselves and then talk to them. I don’t think the owners of the forum would permit that. But you might be able to run some searches that would identify those people and then send them e-mails. They keep quiet. They know what will happen to them if they share their experiences in plain, easy-to-understand statements. But these people are like all other people. They want to help their friends. So, if you listen carefully, you will see them trying to work around the limits that the site owners place on them and trying to help out their fellow community members with the real story from time to time.
4) Brett Arends at the Wall Street Journal — Brett writes about the problems with Buy-and-Hold frequently. He wrote a column saying that Buy-and-Hold is “hooey” because “they’re leaving out more than half the story.” I am sure that he got lots of letters from readers of the paper telling him that they followed true research-based strategies. Again, his editors need to be careful re how much they let him say or the Wall Street Con Men will remove their advertising from the Journal as punishment. But I am confident that Brett can give you names of real live people who follow research-based strategies.
5) Michael Kitces — Michael is a Maryland financial planner. Michael told me shortly after the 2008 crash that a lot of financial planners were talking privately about whether they should start telling the truth about what the research says. Clients were leaving their advisors because the long-term results under Buy-and-Hold were so bad that it was scaring them that they would never be able to retire. If you read Michael’s blog you will see that he is always trying to sneak honest stuff into it without being too obvious. Michael knows the story. I am sure that he has many clients who follow a research-based approach.
6) Adam Butler — Adam is a portfolio manager at Butler, Philbrick & Associates. He told me that the industry is trying to contain the discussion of what the research in this field says because if the truth gets out clients will know that the Buy-and-Hold emperor is wearing no clothes. He can give you some names.
7) Wade Pfau — Wade of course no longer publishes fully honest research since the Buy-and-Hold Goons threatened to get him fired from his job if he continued doing so. But Wade was very excited to learn how stock investing really works (I reported on a good number of his e-mails to me and I can provide you links to those reports if you think they would help) and he is a good guy. He now travels in circles where people talk privately about the dangers of Buy-and-Hold (Wade is friends with Michael). So I am sure that he now knows people who follow research-based strategies and who obtain good results.
8) Todd Tressider — Todd writes the Financial Mentor blog. He wrote an in-depth article pointing out the errors of the Old School safe withdrawal rate studies and he has been selling a report on Amazon on how to do retirement planning in a research-based way. I am sure that he has heard many good stories from readers of his report.
9) Rich Toscano with Pacific Capital Associates in San Diego told me that “you are doing a great service.” Rich obviously gives honest investing advice to his clients. He could let you know about some success stories.
10) Carolyn McClanahan, the Director of Financial Planning for Life Planning Partners, told me that her firm advocates Valuation-Informed Indexing. So she could put you in touch with some people.
People have been following research-based strategies for a long time, Roger. People get into this field for the same reasons that people get into other fields, because they want to do good work and feel good about themselves. So there naturally are people who give honest advice rooted in the academic research. If you go looking for them, you will find them. They are out there. My guess is that about 10 percent of the population follows research-based strategies today.
I’d like to make it 90 percent!
I could use your help!
The members of the Buy-and-Hold Mafia have big and scary Goons doing their dirty work!
But I’ll let you in on a little secret. Those big and scary Goons cannot do a thing to us if we stick together. Their intimidation tactics work only if the good people react in fear to them. If we stand up to them and just go about our business, they go down. In some cases, they land in prison! Once prison sentences are announced, that will go viral and I have a funny feeling that we won’t be hearing too much anymore about the use of Goon tactics being used by the Buy-and-Holders to spread their “ideas.”
Anyway, those are some names to get you started. I believe that you will find that the closer you look into this, the better you will feel about it. I have been developing the Valuation-Informed Indexing concept for 11 years now and I can tell you that it has never once let me down. This is good stuff.
Take care, man.