Set forth below is the text of a comment that I recently posted to another blog entry at this site:
I don’t know Rob, the ability to make guesses about the future and get them wrong doesn’t seem like a very valuable skill.
It’s not, Anonymous. We couldn’t possibly agree more.
But people have been doing it since the beginning of time, haven’t they?
That’s why I love the idea of rooting one’s strategies in the peer-reviewed research so freakin’ much!
Doing that gets you out of the realm of the subjective and brings you into the realm of the objective.
The Buy-and-Hold Pioneers were 100 percent right about that one. That’s why I love them so darn much. That’s why I want to bring Buy-and-Hold back to what it was in its early days — a research-based investing strategy.
I intend to continue to make guesses about the short-term future. I’ll probably get most of them wrong. Perhaps I will stumble onto a gold mine with one of them someday and we will all benefit. Perhaps not. The key, though, is that I will always ALSO continue advocating the first research-based strategy. And that means that there will always be plenty of people who will know not to pay too much attention to those subjective short-term guesses because the core of a long-term investing strategy has to be the peer-reviewed research, which as of today tells us that short-term guessing doesn’t work.
You’re engaged in short-term guesswork every day that you wake up and leave your Buy-and-Hold strategy in place, Anonymous. There’s now 33 years of peer-reviewed research showing that Buy-and-Hold can never work for a single long-term investor. Yet you solider on. Why?
Because there’s a Get Rich Quick urge that resides within all of us that tells us to ignore the research and to fall for the illusion that we will this time manage to pull off something that has never been pulled off before — to invest all our retirement money pursuant to a pure Get Rich Quick approach and not live to regret it sooner or later. Good luck with that!
We can’t do it.
My guesses often turn out wrong. So do Bogle’s. So do Shillers. So do yours.
There is only one strategy that has never failed for 140 years running. The research-based strategy.
Why? Because the research is not freakin’ human! The research doesn’t have a Get Rich Quick urge residing within it. So the research doesn’t fall for all the foolish fantasies that we humans so often fall for.
That’s why we are able to reduce risk by 70 percent just by being willing to abandon the Buy-and-Hold fantasy, Anonymous. It is the Buy-and-Hold fantasy, the idea that subjective guessing games might work out this time even though they have never before worked out, that is the cause of most of the risk of stock investing. It turns out that not only is Get Rich Quick not the solution, Get Rich Quick is actually the problem!
I am sure.
When I guess, I call it guessing. I don’t shift to a pure Buy-and-Hold strategy because I made one or two lucky guesses. Yes, I speculate in columns. And, yes, it appears that my track record with the speculation stuff is no better than the track records of the thousands who have gone before me. But at least I don’t advocate speculative investing strategies. I advocate Valuation-Informed Indexing. I advocate the true research-based stuff.
Do you see how that makes a difference?
It’s harmless fun to write a speculative column. You hurt millions of people when you put fantasy numbers in a retirement study and mislead people into thinking that it is based on anything real.
You don’t see me threatening to kill your wife and children because you pointed out that one of the silly predictions that I made in my column didn’t work out, do you?
That’s the difference between me and John Greaney. John Greaney is a Buy-and-Holder. I am not. So my ego is not wrapped up in all the subjective Get Rich Quick garbage. I can laugh at my mistakes. John has to cover his up out of shame. Yuck! Not this boy. Find somebody else, you know?
I wish you all good things, my long-term subjective fantasy-following Goon friend.
Rob
I don’t need to make guesses. I am not interested in marketing timing get rich quick schemes. I stick with the peer reviewed research and track record of success know as buy, hold and rebalance.
I obviously don’t agree.
But I certainly wish you the best of luck with it, my old friend.
There are millions of good and smart people who agree with you. So perhaps I am the one who is wrong here.
Rob
I don’t want the risk of a trading scheme when we already have the success of buy, hold and rebalance. Yes, my approach is slow and steady versus the volatility of a get rich quick scheme, but it allow me to have a much lower risk profile with a diversified portfolio that is likely to be more succsessfal that tat of risky market timimg.
There is no risk in exercising price discipline, Anonymous.
All the risk comes from failing to exercise price discipline.
Rob
Sure, the risk is obviously the ‘Rob Bennett risk’ which can be described as ‘finding the holy grail of investing just in time for it to stop working for the rest of his life’.
That particular risk is always present, Laugh. None of us can say anything with perfect certainty that it is so.
But what are you going to do? Valuation-Informed Indexing has worked for 140 years out of 140 years. Buy-and-Hold has worked (in the long term) for 0 years out of 140 years. I’ll take VII.
But, yes, it could be that we are living in the times when all the rules that have applied in stock investing since the beginning of time will be flipped on their heads. The odds of that being the case are greater than zero.
Rob