Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
First you challenge me to post outcomes data to show that you shouldn’t time the market and then you make a follow up post saying you won’t let me post the data. This seems to be the only site that doesn’t allow truthful posting and that your definition of “honest” posting is merely your opinion.
There is no outcomes data supporting Buy-and-Hold. The idea is absurd. There’s plenty of data supporting every aspect of Buy-and-Hold except for the “idea” that market timing is not required. But looking for data to support the idea that market timing is not required is like looking for data to support a perpetual motion machine.
Wade Pfau spent 16 months of his life looking for data supporting the idea that market timing is not required. He came up empty-handed. His posts at the Vanguard Diehards board reporting on our research were persuading people when you Goons stepped in and threatened to destroy his career if he kept doing honest work. If you really want to know whether market timing works or not, you would drop all the criminal stuff and just let people post what they believe.
Would you get people saying they believe in Buy-and-Hold? You would. But, if you permitted honest posting, over time the number who believe that market timing is not required would diminish. That’s the key. We need to permit honest posting. Otherwise, we are stuck believing what we believed in 1980 and cannot move forward in our understanding of how stock investing works. I want to move forward. That’s why we have been working at cross purposes for 18 years now.
There are other sites that permit discussion of pieces of the truth. But this is the only place that I know of where it is regularly pointed out that we need to discuss the criminal stuff if we are all to move forward. Our laws against death threats and extortion and financial fraud are important and necessary laws. Without enforcement of those laws, Buy-and-Holders can intimidate people who challenge their views and thereby stop knowledge of the far-reaching implications of the last 39 years of peer-reviewed research from spreading across the planet.
Everything that I post is my opinion. I believe that Shiller’s Nobel-prize-winning research is legitimate research. Given that that is my opinion, I need to say that. If I say that I believe that Greaney’s retirement study contains a valuation adjustment, I am engaging in financial fraud myself.Thanks but no thanks, you know?
Please take good care.
Rob
If Buy and Hold never worked, how have all these people been able to retire? Why haven’t you become incredibly wealthy by investing with VII?
Following a strategy that is inferior to a research-based strategy does not mean that you will never be able to retire. Refusing to practice market timing increases your risk and diminishes your return. But it does not rule out the possibility of ever being able to retire.
Over the course of an investing lifetime, Valuation-Informed Indexing puts hundreds of thousands of dollars in the pockets of most investors who follow it. It would be a rare case where the strategy by itself made someone “incredibly wealthy.” It is not intended to do that. The idea is to reduce risk while increasing return by using the last 40 years of peer-reviewed research in this field as guidance.
My best wishes.
Rob
You said that Buy and Hold never worked. If that is the case, we would have had mostly retirement failures. If you knew how investing worked (with VII) of course you should be wealthy. Now you seem to be saying something totally different.
I never said either of those things.
Going with a Buy-and-Hold strategy is always a negative because Buy-and-Holders refuse to engage in market timing and market timing is essential if you want to keep your risk profile constant over time. But just because you use a sub-optimal strategy doesn’t mean that you can never retire. It means that it is going to take you longer and you are going to be taking on unnecessary risk.
The other side of the story is that, if you are willing to engage in market timing (to practice price discipline!), you will earn higher returns while taking on less risk. That doesn’t mean that you are going to be wealthy. It means that you are going to do better than if you had followed a strategy that does not call for market timing.
Rob