Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“Even long term timing involves getting in and out of the market and getting it right.”
No, it doesn’t. Stock prices remain high for very long time-periods and then remain low for very long time-periods. It it not necessary to identify on what day or week or month or year prices are going to turn. All that you need to do is to develop a conviction that you will never fall for the Buy-and-Hold mumbo jumbo, that you will always try to Stay the Course by engaging in long-term market timing and you are there, far ahead of most other stock investors.
“Show me just one person that has done this successfully as I have yet to see this person.”
I co-authored peer-reviewed research with Wade Pfau showing that every investor since 1870 who followed this approach succeeded with it. If you are so anxious to know about all the successes, why did you threaten to get Wade fired from his job if he continued to do honest work? We could have all worked together to get that research featured on the front page of the New York Times and today you would see it being discussed at every investing site on the internet. You would hear enough success stories to make your head spin.
“To the opposite, the buy and holder doesn’t have to change a thing.”
The market changes things for him when the Buy-and-Holder fails to engage in market timing in response to big price shifts. An investor who has the proper risk profile when the CAPE value is 16 has a horribly wrong risk profile if he sticks to the same stock allocation when the CAPE value goes to 32. To say that a Buy-and-Holder is smart not to change a thing when stock valuations change dramatically is like saying that a driver is smart to maintain the same speed when there is ice on the road as he did when the road was clean. Huh? What the f? That makes zero sense. That is reckless in the extreme.
Rob
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