Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
I agree that the amount in my account will not be the same in the future as it is today. Based on the peer-reviewed research and history, the amount should be significantly higher. Meanwhile, your $500 million windfall will still be a fantasy.
The historical record shows that your account will grow over time. That’s because the U.S. economy will grow over time. The performance of stocks is tied to the performance of the underlying companies.
But it makes zero sense to stay at the same stock allocation at all times. Stocks carry more risk when irrational exuberance is sky high. Investors who want to Stay the Course in q meaningful way need to lower their stock allocation a bit to keep their risk profile stable over time.
Buy-and-Hold is a marketing gimmick. It suggests that irrational exuberance gains are as real as gains rooted in genuine economic growth. Investment experts should be helping investors to avoid Buy-and-Hold strategies, not suggesting that they follow them. It’s not all about turning a quick buck.
My sincere take.
Rob
Why do you keep wasting your time with this Rob? No one believes your delusions. Is it to help you cope with your problems?
I think it’s an important issue. People need access to honest accounts of the what the peer-reviewed research reveals about how stock investing works.
Lots of people have spoken with great enthusiasm about Valuation-Informed Indexing. Not a majority, certainly. It’s about 10 percent of those who are exposed to the concept who speak positively about it. What if there were no abusive posting or criminal behavior on the part of the Buy-and-Holders? The 10 percent would have turned into 20 percent and the 20 percent would have turned into 40 percent and the 40 percent would have turned into 80 percent.
There’s not one person alive who doesn’t want to know how stock investing works. So permitting honest posting re the research is a win/win/win/win. The Buy-and-Holders themselves often talk about learning from the peer-reviewed research. That’s where I picked up the idea. But you can’t consider only research that supports your original ideas. Sometimes research teaches you new and unexpected things. That’s the story with Shiller’s Nobel-price-winning research showing that valuations affect long-term returns.
I believe that Buy-and-Hold is the past and that Valuation-Informed Indexing (which is Buy-and-Hold updated to reflect Shiller’s amazing research findings re valuations) is the future.
We’ll see.
Rob
That is B.S., Rob. But it is not really the question. How is this helping you with your situation? Is it just an outlet to help you mentally cope? Is it something that helps you provide a cover for laziness?
I believe that everyone who comments in any way on stock investing should be advancing his or her sincere thoughts and I believe that those thoughts should be rooted in what the peer-reviewed research shows. That’s how we learn. I don’t believe that there should be any penalty whatsoever for expressing one’s sincere thoughts. It is because people have been intimidated into keeping it zipped that irrational exuberance (which benefits no one in the long run) has gotten so out of control.
Think where we would be as a nation of people if everyone who believed that Shiller’s Nobel-prize-winning research was legitimate research had said that that was what he believed going back to the day in 1981 when that research was published. We sure wouldn’t have a CAPE today of 38. We wouldn’t have experienced that horrible Buy-and-Hold Crisis of 2008. We wouldn’t have seen all of the political frictions (the Tea Party Movement and the Occupy Wall Street Movement) that followed from it. We wouldn’t today be living under the cloud of seeing millions of failed retirements and hundreds of thousands of failed businesses and millions of people thrown out of work in the next Buy-and-Hold Crisis. Irrational exuberance is seriously bad stuff, you know?
I wish that I had a magic wand and that I could make all the resistance to permitting discussion of the peer-reviewed research go away and thereby permit us all to live better and fuller and richer and freer lives. I don’t have a magic wand. But it’s not like we would need to publish new research or enact new laws or persuade people to care about their retirements to make all the good stuff happen. We already have all that. We need only one thing — to have the courage to stand up to the Buy-and-Hold goon squads and say what we believe. I am asking everyone who lives in the United States to do that.
It doesn’t sound like I am asking much. But, if I don’t have the courage to do myself what I am asking others to do, that’s pretty darn lame, is it not? So I do what I am asking others to do. The hardest thing with this story is explaining how things could be the way they are. We all care about getting stock investing right. We have 44 years of peer-reviewed research showing us how to do it. We have a book that explains it all. We have an internet communications medium that permits us to get the word out to millions overnight. We have the 16 months of effort that Wade Pfau put into determining whether there had ever been any research supporting this loony-tunes idea that maybe there are some circumstances in which valuation-based market timing is not 100 percent required of every investor. And yet this is where we are?
This is where we are. The Get Rich Quick/Buy-and-Hold urge that resides within all of us is a very, very, very, very strong urge. That’s the story here. We are 95 percent of the way there toward overcoming it and we very much need to overcome it. But we very, very much would like to find some way to avoid having to overcome it. That’s the story. We have as a nation of people adopted a taboo against discussion of the 44 years of peer-reviewed research showing that valuations affect long-term returns and insuring that we continue to suffer from our ignorance of how stock investing works. All that we need to do to overcome that taboo is to apply the same laws and social norms that govern every field of human endeavor other than the investment advice field in the investment advice field as well. Can we do it?
I think we can do it. I think we are going to do it. I think we are too close not to take the few final steps required to begin living happier lives together. But I need people to stand up to you goons, I need people to express their sincere views and to speak up in support of the right of others to express their sincere views. I ask others to do this magic thing. Am I willing to do it myself?
I like to think that I have what it takes to do it myself. I sincerely believe that the Greaney retirement study lacks a valuation adjustment. So that’s what I say when the subject of safe withdrawal rates turns up in discussions of stock investing held on the internet. That’s pretty much it.
I believe that the arc of human history bends toward the use of rationality in investment analysis. I believe that deep in our hearts we want to get there and I believe that we will get there. I believe that there is 20 times more good in this story than there is bad. I believe that we are fundamentally a good people. So we are going to find a way to leave the Get Rich Quick/Buy-and-Hold stuff behind and help people to learn about and follow research-based stock investing strategies. I like us. I want to see us enjoy the benefits of the amazing research that Shiller provided for us 44 years ago.
Does that help?
Rob
Notice how you can’t even answer a straight question. Instead, you are compelled to spew the same nonsense
My best wishes to you and yours, Anonymous. I naturally wish you all the best that this life has to offer a person.
Rob