A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

The Valuation-Informed Indexer Experiences Less RIsk AND Enjoys Higher Returns

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I recently posted a Letter to the Editor to the Early Retirement Planning Insights site entitled The Valuation-Informed Indexer Experiences Less Risk AND Enjoys Higher Returns.

Juicy Excerpt: A stock allocation of 120 percent at a time of moderate prices is less risky than a stock allocation of 80 percent at a time of insanely high prices. If we were going to be theoretically consistent, we should either not count the benefits that a Passive Indexer gets from being at an 80 percent stock allocation at a time of insanely dangerous prices (because the risks here are so great that we simply refuse to look at the possibility, just as we refuse to look at the possibility of a VII investor being at a stock allocation of 120 percent at a time of moderate prices). OR we should look (at least sometimes) at the benefit that a VII investor gets from being able to go to stock allocations of higher than 100 percent at times of moderate or low prices.