A Rich Life

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

Valuation-Informed Indexing #720: Buy-and-Hold Is a Thrill Ride

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I’ve posted Entry #720 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Buy-and-Hold Is a Thrill Ride.

Juicy Excerpt: We’ve gotten accustomed to the thrill ride. The market has been operating in the same manner for so long that we have come to believe that it’s the only way it could operate. Not so! Shiller was awarded a Nobel prize for his research because it tells us something important. What it tells us is that the market operates as it does not because that’s the only possibility but because our lack of knowledge of the realities caused us to invest in ways that frequently caused the market to become dysfunctional.

Comments

  1. Systematic investing for 30+ years is as boring as it gets, but boring is good. Buy and hold has always worked. We don’t need any schemes. Instead, a person just needs to bring in a steady income, invest as much of that income as possible and keep it boring. After that, there is no need to worry about having to use some kind of get rich quick timing scheme or hope that you can cook up some hair-brained idea for a big windfall payment.

  2. Price crashes and economic collapses are not boring. They are horrible events that do harm to millions of people. We should all do everything in our power to bring them to an end. We are fortunate to be alive at a time when we have 43 years of peer-reviewed research available to us showing us how to do just that.

    Rob

  3. When prices drop, it is a great to buy even more. Buy and holders get cheap shares from market timers. Being broke in your 60’s is what is a horrible event. We have no desire to be like you.

  4. If it’s true that, when prices drop, it is great to buy more, then it’s also true that, when prices increase, it’s great to buy less.

    Rob

  5. Except you don’t know how much higher the prices will go. No one knows which direction. You even admit that you expect a big market drop a long time ago. When you get past the age of 60 and the expected drop did not occur, you will have missed your opportunity to buy. It is too late by that time. With buy and hold, a 4% withdrawal rate has worked over EVERY 30 year period, yet market timing has never worked. I choose to go with what has always worked.

  6. It didn’t work for the millions of people who were destroyed in the various Buy-and-Hold Crisis.

    It’s true that no one can say how much higher prices will go in the short term. But we can look at the historical return data and see how much more risky stocks are when they are priced insanely high and you can lower your stock allocation to get your risk profile back to where you wanted it to be. The Bennett/Pfau research compares that approach with Buy-and-Hold over the entire historical record and finds that keeping your risk profile stable has soundly beat Buy-and-Hold for the entire history of the U.S. market. I wonder why it is that Buy-and-Holders are so hotly opposed to permitting civil and reasoned discussion of the peer-reviewed research?

    Rob

  9. “ We see things differently, Anonymous.”

    I see $8 million in my accounts and you see nothing in your accounts. Yes, we see things differently.

  10. I worked up the courage to publicly point out the error in the Greaney retirement study on May 13, 2002, and you haven’t done so yet. I would rather have the peace of mind that comes from doing right by my fellow community members than the money. Call me madcap.

    Rob

  11. We choose not to join you in living in your made up world. We choose not to be broke like you. You are not doing anything for your fellow community members. You are just living in a little made up world, built around a story that you tell in order to not have to work a job and earn a living.

  13. Rob,

    If you want people to believe you, then you have to support your comments with data, facts and numbers. Telling people that you are “honest” or that something is “peer-reviewed” is meaningless. You just throw those words around because you think it will somehow give you credibility.