I’ve posted Entry #714 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called How Long Will Stocks Remain Undervalued After Prices Drop Below Fair-Value Levels?
Juicy Excerpt: The most unnerving thought is that the length of the bull market may signal the length of the bear market that inevitably follows from it. This has been an astoundingly long bull market. As I noted above, prices were high in 1996. They have remained high ever since, with the exception of about 12 months in the immediate aftermath of the 2008 crash. So, if long bull markets produce long bear markets, the next bear market may be a doozy.
So if the market hasn’t done what you thought it would do for the last 27 years, then VII doesn’t really work. Meanwhile, buy and hold has always worked over every 30 year period in history. Not one single failure.
I think what you are trying to say is that you think that if everyone in the world was able to see you post on every single website on the internet, then the entire world would totally change in how they invest and then VII would finally work. Is that right?
The peer-reviewed research looks at what has worked for the entire history of the market. It shows that Valuation-Informed Indexing has TROUNCED Buy-and-Hold for 150 years now. It allows people to invest in stocks with far less risk and to obtain far higher long-term returns.
When you say that Buy-and-Hold does better, you are not subtracting for the effect of irrational exuberance. Gee, I wonder why you do that. Irrational exuberance gains are fantasy gains, It’s always a negative to count fantasy gains. And Buy-and-Holders always count them.
The counting of irrational exuberance gains as real turns Buy-and-Hold into a marketing gimmick. It turns retirement planning into a thrill ride. Big ups followed by bog downs. When I was a Buy-and-Holder, it was because Buy-and-Holders were purported to believe in research-based strategies. That’s me.
Rob
That is not what the research actually says and is clearly not the outcomes we have seen. If you want to consider stock risk, then you can’t ignore the risk of every other investment vehicle. Look at how everyone has gotten destroyed by inflation with every other investment option other than stocks. You are the poster boy of retirement failures.
Stocks are in a general sense a better choice than the other options. I certainly agree with that much. But price always matters. No matter how great stocks are, there is a price at which they are no longer the best option. To be able to identify what that price is, you need to always pay attention to irrational exuberance, to practice price discipline, to engage in valuation-based market timing. When the Buy-and-Holders discourage investors from doing this, they take an amazing asset class and turn it into something dubious and dangerous.
I would permit honest posting re the peer-reviewed research. Marketing gimmicks taken too far hurt people in very serious ways.
Rob
It is irrational exuberance to push a timing scheme that has never worked. There is less risk going with a strategy that has always worked over every 30 year period and that is Buy and Hold. It is the least risky path for investors based on the REAL peer-reviewed research. We need to reject people pushing risky timing schemes.
Okay, Anonymous.
My best wishes to you.
Rob
Do you think most 60+ would want to be in your position now?
I do not.
But I think that most are fine with the idea of honest posting re the peer-reviewed research being permitted at every site. And I believe that. had that been permitted from the first day, I would today be a multi-millionaire as a result of my journalism work re these matters. And I think that most 60+ would be thrilled to be multi-millionaires. So there’s no issue there.
Rob