Valuation-Informed Indexing #725: The Hardest Thing About Following Research-Based Investment Strategies Is That It Requires Acknowledging Human Fraility, Which Is a Scary Thing to Do

I’ve posted Entry #725 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Hardest Thing About Following Research-Based Investment Strategies Is That It Requires Acknowledging Human Fraility, Which Is a Scary Thing to Do

Juicy Excerpt: Shiller’s research tells a more disturbing tale. Stock investors are human. That means that they are at times highly emotional. They like thinking that they are doing better financially than they really are. So they push stock prices above the levels justified by the economic realities, thereby creating irrational exuberance gains. Unlike gains justified by the economic realities, irrational exuberance gains are not real and do not last. People who count on them to finance their retirement always end up regretting it. The only way to combat irrational exuberance is through valuation-based market timing.