Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Here is a very simple explanation of why market timing is a bad thing:
https://awealthofcommonsense.com/2024/08/timing-the-stock-market-using-valuations/
I don’t agree even a tiny bit that, if you lower your stock allocation a bit and then prices go even higher, you have somehow “missed out” on something. You “missed out” on having more irrational exuberance in your portfolio That’s a good thing! You don’t want that garbage in your portfolio! Irrational exuberance is what makes stock investing risky! We all should want to see as little of that as possible. We all should be working together as a nation of people to get the CAPE value down when it gets to the sorts of levels where it resides today. We should all want to “miss out” on bull markets and bear markets and economic collapses. We sbould all be satisfied with the 6.5 percent real gains that are provided by economi growth. Thinking that something more than that can be a good thing just gets us into a Buy-anfd-Hold mode of thinking and hurts us.
This is the issue that the Bennett/Pfau research looks at. We found that, as Wade put it, “Yes, Virginia, Valuation-Informed Indexing works!” Practicing price discipline when buying stocks lowers risk dramatically while also increasing long-term returns dramatically. That’s investor heaven.
This is not that hard to understand. What we are dealing with today is a marketing gimmick gone haywire. The Buy-and-Holders did a wonderful thing in suggesting that investing strategies be rooted in the peer-reviewed research. That’s their greatest contribution. They had the bad fortune to be developing their strategy when all of the research was not yet available; Shiller didn’t publish his amazing research until 1981. The obvious thing to do was to incorporate his amazing research findings into their strategy as soon as they were published. Somehow that wasn’t done and we have seen a 43-year cover-up. And so now it looks really, really, really bad for people to find out about this massive act of financial fraud.
It’s not going to look any better a year from now or two years from now or three years from now. So I vote for opening every site to honest posting re the research by the close of business today, without a single exception. No one should ever feel intimidating into keeping quiet about an error in a retirement study, which is the situation that I found myself in fron May 1999 through May 2002. I mean, holy moly!
Where I’m coming from.
My best wishes.
Rob
“Practicing price discipline when buying stocks lowers risk dramatically while also increasing long-term returns dramatically.”
Do you have any actual numbers to back up “increasing long-term returns dramatically”?
It’s all in the research paper that I co-authored with Wade Pfau. That’s the most important research done in this field in decades. We should have had discussions about that paper at every investing site on the internet. Had we done that, we would have a much deeper understanding of these issues, which are the most important issues in personal finance. There’s a good reason why the laws of the United States permit honest posting re the research and prohibit the tactics that you Goons have employed to suppress it.
Rob