“Valuation-Informed Indexing Has Been Delivering Higher Returns at Greatly Reduced Risk for 150 Years. What We Need to Do Now Is to Open Every Investing Site on the Internet to Honest Posting re These Matters. Then We Will See lots of Good and Smart People Asking Lots of Good and Smart Questions and We Will See Lots of Good and Smart Follow-Up Research Published.”

Set forth below is the text of a comment that I recently posted to the  discussion thread for one of my columns at the Value Walk site:

First of all, you didn’t author Wade’s paper. Second, you have zero results for VII as you have no outcomes data from implementation. Third, you didn’t address one single point I mentioned above.

Wade wrote the entire paper. But he came up with the idea of writing a paper comparing Valuation-Informed Indexing and Buy-and-Hold by reading my posts on the Bogleheads Forum (it was then called the “Vanguard Diehards”) and he consulted with me at every step as to how Valuation-Informed Indexing works. We exchanged scores and scores of e-mails during the 16 months in which we worked together. He was effusive in his praise for me and my contributions and for the Valuation-Informed Indexing concept during that entire time-period.

It would be good if we had all started exploring the Valuation-Informed Indexing concept back in 1981, when Shiller published his peer-reviewed research showing that price discipline/long-term timing always works. I very much wish that we had done so. It didn’t happen that way. Shiller’s research findings came as a shock. Hundreds of thousands of people were already building careers based on the promotion of the Buy-and-Hold strategy. Lots of cognitive dissonance kicked in. Then there was a huge bull market, which in the eyes of millions of good and smart people confirmed the merit of the Buy-and-Hold strategy. And here we are.

The best that we can do today is to use the historical return data to show which strategy has been superior over the entire history of the U.S. market. That’s what Wade and I did in our paper. Our paper left no doubt as to the answer to that question. Valuation-Informed Indexing has been delivering higher returns at greatly reduced risk for 150 years. What we need to do now is to open every investing site on the internet to honest posting re these matters. Then we will see lots of good and smart people asking lots of good and smart questions and we will see lots of good and smart follow-up research published.

Do I believe that Valuation-Informed Indexing will continue to outperform? I very much believe that. Do I acknowledge the possibility that that will not be the case? I acknowledge that possibility. There is only one way to find out. We need to launch a national debate re these matters. That works to the benefit of each and every one of us. If Buy-and-Hold is best, that will come out. If Valuation-Informed Indexing is best, that will come out. If some combination of the two strategies that no one has even proposed as of today is best, that will come out. Permitting extensive debate on these matters is a win/win/win/win/win.

That’s my sincere take, in any event. I naturally wish you all good things,.

Rob