A Rich Life

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

ValueWalk.com Article #5 — Why Long-Term Timing Beats Rebalancing

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The www.ValueWalk.com site has posted my article entitled The Investor’s Scenario Surfer: Part One — Why Long-Term Timing Beats Rebalancing.

Juicy Excerpt: After four years of investing, I have a smaller portfolio than I started with. Only the 20 percent stock portfolio is up. This does not signal that the decisions to go with stock allocations of higher than 20 percent were ill-informed ones. Long-term stock returns are highly predictable. But they are not precisely predictable. There is always a range of possibilities that may turn up. The allocation choices made were reasonable ones, given the valuation levels that applied when the choices were made. In this particular case, the 20 percent stock allocation choice was rewarded. But the odds are that stock allocations higher than that will produce better results over the long term. The key to effective long-term investing is always seeking to have the probabilities on your side and not getting caught up in the emotion that can follow from seeing a strategy fail to immediately generate satisfactory results.

Comments

  1. This time. I see an increase in the P/E10 level to 16.6. and an increase in my portfolio value to $106,043. For Year Three, I stick with my 60 percent allocation and my portfolio value drops a tiny amount to $104,566.

    When you say that you “stick with my 60 percent allocation” do you mean that you sell some stock to get back to 60%?

  4. I’m grateful to you for taking time out of your day to help all of us out, Evidence.

    Rob

  5. Rob, the above exchange you just is a prime example of why no one takes you seriously, because you refuse to actually debate point by point.

  6. We see things very differently, Peter.

    There’s now a Ban on Honest Posting re the Big Fail of Buy-and-Hold in place at Motley Fool. There’s also a ban in place at Morningtar.com. And at Bogleheads.org. And at the Early Retirement Forum. And at IndexInvetors.com. And at the Get Rich Slowly forums. And at a good number of other places.

    Site owners do not impose Bans on Honest Posting on ideas that they do not see as a threat, Peter. Not ever. It just does not happen.

    The Buy-and-Hold advocates have taken Valuation-Informed Indexing very, very, very seriously at every place it has been discussed. Unfortunately, they have taken it seriously as a threat to their status as “experts” rather than as a solution to their readers’ investing problems.

    The next step is to get them to take the economic crisis caused by the reckless promotion of Buy-and-Hold for 30 years after the academic research showed that there is precisely zero chance of it every working out for the long-term investor seriously enough to persuade them to life the bans and thereby to permit the millions of middle-class investors who need to learn about more realistic investing strategies to do so.

    I hope that in time you will come to join our effort to persuade the Buy-and-Hold advocates to do what they very much need to do, Peter. I think it is fair to say that that would represent a win/win/win/win/win for everyone concerned (including the Buy-and-Hold advocates themselves, to be sure).

    Thanks for sharing your thoughts.

    I think.

    Rob

  8. Read the thread and all will be revealed to you, Peter.

    Please read it to learn, not to start a fight.

    If you are open to learning, I can make you a more effective investor than you have ever been before.

    If you are so closed to learning (because you cannot bear to accept that there was a time when you did not know it all) that you would rather start a fight, there is nothing that I can do for you.

    That first step (accepting that you were at an earlier time wrong about how stock investing works) is an inside job, Peter. That one is totally on you. I can pick up the ball only after you manage that first step on your own.

    That first step is a doozy, my new friend!

    Rob

  9. Okay, I read it, and it didn’t explain why you won’t answer a straight question.

  11. I’m not asking for help, merely that you answer a question when it is asked of you.