Valuation-Informed Indexing #408: The Only Problem With Valuation-Informed Indexing Is That It Makes Buy-and-Hold Look Bad

I’ve posted Entry #408 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Only Problem With Valuation-Informed Indexing Is That It Makes Buy-and-Hold Look Bad.

Juicy Excerpt: And it’s hard for Buy-and-Holders and Valuation-Informed Indexers to offer compromise views as a means of papering over their differences. Both strategies are numbers-based strategies. But the numbers generated by the two strategies are very different because it makes a big difference whether valuations are taken into consideration in the calculations or not. It would be nice if I could split the difference with my Buy-and-Hold friends, tell them that I am sure that they are right about a lot of what they say. Actually, I do believe that. But the hard reality is that, if valuations affect long-term returns, the Buy-and-Holders are in an ultimate sense wrong about just about everything. If valuations matter, all of their calculations are wrong even though they are right about many non-valuation-related matters.