A Rich Life

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

“If You Don’t Get the Question of Whether Market Timing Is Required or Not Right, You Can’t Get Anything Right. That One Is Fundamental.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“ If everyone has all the information at their fingertips, why do we even have academic researchers? ”

They are not researchers. Research is making discoveries. What they are doing is analytics. This is why you have such a large disconnect.

Shiller made a discovery. He discovered that the market is not efficient, that valuations affect long-term returns, that risk is variable and that market timing is required. That’s huge. That changes the analysis of every strategic question that comes up in stock investing.

If you don’t get the question of whether market timing is required or not right, you can’t get anything right. That one is fundamental.

Rob

 

Comments

  1. “If you don’t get the question of whether market timing is required or not right, you can’t get anything right. That one is fundamental.”

    This statement is correct as we have yet to see even one successful outcome when using market timing. Anyone that pushes timing schemes has not gotten anything right….as you say.

  2. We agree that the question is fundamental.

    We disagree re the reality.

    You say that timing is a mistake. I say that it is absolutely critical. The market cannot do its core job — getting prices right — if investors don’t engage in market timing. When enough investors become persuaded that market timing is not required, the market becomes dysfunctional and eventually it collapses and we all pay a terrible price.

    My best wishes to you and yours.

    Rob

  3. What I say is that we have not even one successful outcome using market timing. If you heart surgeon said that he wants to do heart surgery on you, but has yet to have a successful outcome, are you going to do the surgery? Of course not. You don’t risk your life and you don’t risk your retirement. You go with proven outcomes, like buy and hold.

  4. What I say is that we do not have one successful outcome with Get Rich Quick/Buy-and-Hold. If irrational exuberance is a real thing (and there is 40 years of peer-reviewed research showing that it is), then you always need to adjust the number on your portfolio statement for the effect of irrational exuberance to know the real numbers. Failing to do that always hurts you because it is always a bad thing to make decisions based on bad numbers. Shiller’s Nobel-prize-winning research showing that irrational exuberance is a real thing changes everything that we once thought we knew about how stock investing works.

    Rob

  5. Your jury will demand to see proof of death threats. Your jury will demand to see proof of VII outcomes. Your jury will demand to see proof of extortion. Your jury will find that you have committed perjury.