“Buy-and-Hold/Get Rich Quick Is What Sells. It’s a Fantastic Marketing Gimmick to Persuade People That Irrational Exuberance Gains Are Real and Lasting.”

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

“TIPS, IBonds and Certificates of Deposit are all good choices. “

What long term real return are they offering at the minute?

A Valuation-Informed Indexer would not be buying them for the purpose of obtaining the return that they offer “at the minute.”Valuation-Informed Indexing is a long-term strategy. The Valuation-Informed Indexer would invest in those asset classes because it would permit him to buy more stocks when stocks are available at good prices. The peer-reviewed research that I co-authored with Wade Pfau shows that Valuation-Informed Indexing has performed far better than Buy-and-Hold for the entire history of the stock market.

It is impossible for the rational mind to imagine a circumstance in which exercising price discipline (by engaging in market timing!) could be a bad thing and the entire history of the stock market confirms this common-sense understanding of how things work. Buy-and-Hold/Get Rich Quick is what sells. It’s a fantastic marketing gimmick to persuade people that irrational exuberance gains are real and lasting.

Valuation-Informed Indexing is what works. It is the first true research-based strategy. It is Buy-and-Hold corrected for what we have learned from the last 41 years of peer-reviewed research in this field. Those 41 years of peer-reviewed research are the most important 41 years of peer-reviewed research in the history of investment analysis.

My best wishes to you.

Rob