A Rich Life

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

Valuation-Informed Indexing #455: Neither Buy-and-Hold Nor Valuation-Informed Indexing Are Truly Subject to a Testable Hypothesis

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I’ve posted Entry #455 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Neither Buy-and-Hold Nor Valuation-Informed Indexing Are Truly Subject to a Testable Hypothesis.

Juicy Excerpt: There’s only one question that matters — are stock price changes caused by a rational assessment of economic developments or by swings in investor psychology? If price changes are caused by a rational assessment of economic developments, you can trust the numbers on your portfolio statement — they are rooted in economic realities. If price changes are caused by swings in investor psychology, they cannot be trusted to report accurately your accumulated wealth. Investor psychology can change on a dime and most of your life savings can be transformed into so much cotton candy to be blown away in the wind.