Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Take a look at my Tesla. It doesn’t have a microwave oven. That must be an error.
That’s what we’re up against.
If we decide as a nation of people in the wake of the next Buy-and-Hold Crisis that we would like to bring an end to bull markets and bear markets and economic crises, the last 44 years of peer-reviewed research is sitting there waiting for us. I say “go for it.”
Emotion (marketing) vs. reason (research),
Rob
Emotion (market timing resulting in failure) vs reason (buy and hold proven track record).
It’s emotional to ignore the effect of emotion on stock investing. Stocks are purchased by humans. Humans are emotional creatures.
We can minimize the influence of emotions. To do that, we need to acknowledge that emotions have an effect and come up with strategies to minimize that effect.
My favorite idea is to print on the portfolio statement the value of the stock portfolio if irrational exuberance were removed. That would put investors on notice that gains rooted in emotion weren’t doing them any good. I think it would make a big difference.
Buy-and-Hold does not have a proven track record. It has a horrible record. What has a good record is the stock market. That’s because the U.S. economy has a good record. But failing to engage in valuation-based market timing adds nothing to the equation and subtracts a great deal. Advocating a pure Get Rich Quick strategy is a big help in turning a quick buck but it destroys countless lives in the long run. We should permit discussion of the last 44 years of peer-reviewed research.
Rob