Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
There is no buy and hold crisis because the vast majority of people do not own any/enough stock to impact their net worth. When stocks crash, it mainly impacts the top 10% and the drop does not alter their ability to still pay their bills. The median household net worth in America is just under $200K. Regardless of what percentage of that amount is in stock, the typical household has a savings issue and not an investment issue. Americans, on average have a problem of not owning enough stock (and other assets) instead of owning too much stock.
When we experience a Great Recession or a Great Depression, it affects everyone, stock holders and non-stock holders alike. I mean, come on.
I’m in favor of people owning more stock. That’s why i believe that posting about Valuation-Informed Indexing should be permitted at every site, without a single exception. Valuation-Informed Indexers enjoy greater lifetime returns because they OWN MORE STOCK over the course of their investing lifetimes. When you stick with the same stock allocation when prices reach insanely dangerous levels, you lose more in the inevitable price crash. Those who follow research-based strategies have more money to invest in stocks when they are available at reasonable and super reasonable prices.
Buy-and-Hold is a marketing gimmick. People would be better off being satisfied with the 6.5 percent real return that is supported by the economic realities. Going full Get Rich Quick in one’s thinking about how the stock market works always subtracts and never adds. It puts a few extra dollars in the pockets of our Wall Street Con Man friends at the cost of destroying millions of hard-working people’s lives. No wonder the Buy-and-Holders feel a need to suppress discussion of the last 43 years of peer-reviewed research in this field!
My sincere take.
Rob
Buy and Hold investors are satisfied getting the market return.
Market timing junkies think they have some magic way of exceeding the market return even though years of experience shows that holding such a belief is not supported by the evidence.
What if the market becomes emotional and produces irrational exuberance? Are the irrational exuberance “gains” part of the “market return” that you expect to get?
We all need to work to keep the market return honest and real. We do that by permitting honest posting re the peer-reviewed research at every site. If all that investors can hear is what our Wall Street Con Men friends want them to hear, they are not going to obtain the market return on stocks they purchase at times of insane levels of irrational exuberance. The Bennett/Pfau research shows that as clearly as anything could be shown. As Wade put it after 16 months of research into the question: “Yes, Virginia, Valuation-Informed Indexing works!”:
Irrational exuberance gains are not the same as genuine economic gains. I mean, come on. Investors can only get the market return for as long as the market remains rational. And that doesn’t happen by magic. We all need to work together to keep our Get Rich Quick/Buy-and-Hold impulses under control to keep the market rational.
My sincere take.
Rob