Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
This video of Siegel and Shiller shows everyone once again that market timing if a failure:
Just look at the predictions from 2014 as to expectations for the following 10 years.
I don’t believe that anyone should place any confidence in any guesses that anyone makes as to what will happen. I believe that we agree on that.
But I believe that everyone should understand that valuation shifts indicate a change in risk. stocks are just not as valuable when they are priced high. To keep their risk profile constant, investors need to engage in market timing.
If you want to call it “risk management” rather than market timing, I’m fine with that. The important thing is that stock investing risk is not constant but variable. Given that risk is variable, the safe withdrawal rates (which is a risk management tool) cannot possibly be a constant number. The safe withdrawal rates VARIES. It changes with changes in the valuation level.
That’s where I’m coming from re this terribly important matter, in any event.
My best wishes to you.
Rob
Risk? What greater risk is there in retirement investing than being broke in your 60’s? You are sitting around telling a bunch of millionaires that they need to be worried about a retirement failure when you are sitting there flat broke. How does that make any sense?
Yes, it all has to be a mass conspiracy since rich people are always wanting to get investment advice from a broke guy.
The research says what the research says.
I believe that you have enough confidence in Buy-and-Hold to follow it yourself. You do not have enough confidence in it to engage in civil and reasoned discussion of what the research says about it. That’s a very bad sign. I believe that as a nation of people we are going to need to reassess decisions that we have made in this realm in the days following the onset of the next Buy-and-Hold Crisis.
I wish you all good things.
Rob
“Yes, it all has to be a mass conspiracy since rich people are always wanting to get investment advice from a broke guy.”
We didn’t know all there was to know about how stock investing works when Buy-and-Hold was being developed in the 1960s. Shiller didn’t publish his amazing research showing that valuations affect long-term returns until 1981. So I would chalk up the error that the Buy-and-Holders made to an understandable mistake rather than to a mass conspiracy.
Everybody doesn’t give up one way of thinking about a subject in the 24 hours after amazing breakthrough research is published. People need time to talk things over and think things over. In time, the new ideas spread. That’s where things went haywire. At some point a number of Buy-and-Holders began engaging in intimidation tactics aimed at suppressing discussion of the new research. That’s how we got to where we are today, with 44 years of peer-reviewed research ignored in almost all discussions of stock investing.
That’s what needs to change. we need to open every investing site to honest posting re the research. That way we can all get up to speed in time. I would have voted to open every site to honest posting re the research on the afternoon of May 13, 2002. I said so at the time. That way, we would be 23 years farther along in our development of the Valuation-Informed Indexing concept. We would all be living richer and freer and better lives today.
Rob