A Rich Life

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

“We Follow Buy-and-Hold Because It Makes Money. It Has Always Worked. We Have Chosen to Support Our Retirements and Our Family. We Don’t Want to Play Any Silly Games “

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

We follow buy and hold because it makes money.  It has always worked.  It has never failed any 30 year period in the entire history of the stock market.  We have chosen to support our retirements and our family.  We don’t want to play any silly games.  We don’t want to be broke.  We don’t want to live out a fantasy life.

I wish you the best of luck with it, Anonymous.

Rob

Comments

  1. I guess that is all crazy talk to you, right? Why would people want to have fully funded retirements and support their families?

  2. People will be able to support their families just fine once we have opened every discussion board and blog to honest posting re the peer-reviewed research. Learning more about how stock investing works is a plus, not a minus. In the post-Shiller era, we know everything that we knew about stock investing in the pre-Shiller days PLUS what we learned from his amazing, Nobel-prize-winning research.

    The idea that valuation-based market timing is not 100 percent required for every investor was a mistake. It happens. People make mistakes. The thing to do when you discover that you have made a mistake is to correct the mistake and to move on to better things. There is no benefit to anyone in pretending that the last 43 years of peer-reviewed research doesn’t exist.

    Rob

  3. People have been able to support their families just fine by working a job, saving consistently (with buy and hold) and avoiding risky timing schemes. Doing the opposite has resulted in you going broke.

  4. Did people do just fine during the Buy-and-Hold Crisis of 1929?

    Or the Buy-and-Hold Crisis of 2008?

    Or the Buy-and-Hold Crisis of the 1970s?

    Irrational exuberance hurts people in very serious ways. We all should be doing everything in our power to combat it. The U.S. economy produces enough economic growth to support annual gains of 6.5 percent real. That should be enough. The Get Rich Quick/Buy-and-Hold stuff just causes a lot of human misery in the long run.

    Rob

  5. Those were all market timing crisis. The market timers sell off their shares and buy and holders snap them up for bargain prices. You need to take a look at who actually owns most of the stock.

  6. So Buy-and-Holders believe in buying more stocks when prices are low but not in buying fewer stocks when prices are high. Makes sense.

    Rob

  7. Buy and holders buy as much as they can during all markets. They benefit from broke market timers.

  8. That’s not what most Buy-and-Holders say. It’s not a buy-as-much-as-you-can strategy. It’s a pro-stock strategy. But so is Valuation-Informed Indexing. The difference is that Buy-and-Holders say to stick with the same stock allocation at all times while Valuation-Informed Indexers say to stick with the same risk profile at all times, which means going with a higher stock allocation when prices are low and a lower stock allocation when prices are high.

    Rob

  9. Yes, that is what they say and we see this is true when we look at statistics as well as who owns stocks. The top 10% own the majority of stock. They only get that way by buying as much as they can.

    You know thus as well since you keep trying to convince these rich people to dump their stock and to stop buying stock.

  10. You said below that Buy-and-Holders buy more when prices drop. You can’t buy more if you have already bought as much as you can.

    I say that the price being offered should affect how much you buy. There is no one stock allocation that makes sense at all valuation levels. It’s a logical impossibility that there could be one in a world in which valuations affect long-term returns.

    Rob

  11. Wrong again. Stock is limited. You can only buy what is available. Buy and holders love it when market timers dump their stock. Just take a look at history and see how the top 10% have consolidated their ownership over the last several decades.

  12. The number of stocks available to buy is limited. The price assigned to those shares is NOT limited. It can be absolutely anything. This is why price discipline (valuation-based market timing) is so critical. Without price discipline, investors will eventually push stock prices up to absolutely crazy levels. What makes Buy-and-Hold so dangerous is that it DISCOURAGES price discipline.

    We should all be promoting valuation-based market timing to the greatest extent possible so that prices do not get out of control. The Buy-and-Holders push things in exactly the opposite direction. The Buy-and-Holders treat irrational exuberance gains as if they were just as valid as genuine economic gains.

    You’re saying again that Buy-and-Holders buy more when prices are low. That conflicts with the Buy-and-Hold dogmas. That’s market timing. If you believe that it makes sense to buy more when prices are low, then you should also believe that it makes sense to buy less when prices are high. Those are two sides of the same coin. You are saying that price should be taken into consideration when buying stocks, which is exactly what I say. That is my core point.

    Rob

  13. You have told everyone for the last several decades that YOU think stocks have been too expensive. Because of that, YOU got out of stocks. Others disagreed and kept their stocks and bought even more. YOU went broke, those that bought stock made a huge amount of money. These are long term results. It is easy to see that you were wrong and those that have stocks were right. Now you want these successful people to sell you their stock for cheap prices because you missed out. Not going to happen.

  14. I believed on the morning of May 13, 2002, that the Greaney retirement study lacked a valuation adjustment and I believe that today. There were people at the Motley Fool board who believed that the Greaney study was a legitimate piece of research. Some of those people had become friends. I think that I did the right thing by pointing out the error in the study.

    I believe that the same laws that apply in every field of human endeavor outside of the investment advice field should apply in the investment advice field as well. I don’t think this should be a controversial position. I think it is just emotion on the Buy-and-Hold side that generates all of the phony controversy. Buy-and-Holders are emotional because they want to believe that their irrational exuberance gains are real but they lack an inner confidence that they are.

    It’s an unfortunate sets of circumstances. But also an exciting one. Think where we will be as a nation of people once we have opened every site to honest posting re the research. The last 43 years of peer-reviewed research is truly exciting stuff.

    My sincere take.

    Rob

  16. By definition, you can’t have a CAPE value of 38 unless most people are deceiving themselves about how stock investing works. If we were all thinking clearly, the CAPE value would be a reasonable number. And, when most people are deceiving themselves to the extent they are today, most people don’t want to be told that. So the people telling the real story become outcasts.

    The other side of the story is that we saw thousands of people expressing a desire that honest posting be permitted at every site. And you Goons obviously concluded from what you saw that there was zero chance that Buy-and-Hold would prevail in a civil, reasoned debate or else you never would have behaved in the manner in which you did.

    So we will have some rough days ahead. But the longer term future looks very promising indeed.

    My best wishes to you and yours.

    Rob