The Buy and Hold Myth

The following is a guest post. The opinions expressed are those of the author.

 

The Buy-and-Hold Myth

The most important article ever published on investing appeared in the Wall Street Journal on October 14, 2010. It was a column by Brett Arends titled “The Market Timing Myth.”

Before I give you a link to the column and quote briefly from it, I want to ask you a question. If you were in the market for a used car, would you go to a dealership without having done any homework and ask the dealer whether the cars he picked out for you was in his expert opinion a good choice?

That’s a bad idea, isn’t it?

The used-car dealer is biased. What you want to do is to check out Edmunds.com, identify the fair price for the car you want and then negotiate with the dealer, taking your business elsewhere if he refuses to meet your demands.

Here’s the link — The Market Timing Myth

The article states: “For years, the investment industry has tried to scare clients into staying full invested in the stock market at all times, no matter how high stocks go… It’s hooey…. They’re leaving out more than half the story…. Anyone who followed the numbers would have avoided the disaster of the 1929 crash, the 1970s or the past decade on Wall Street…. I wonder how many stayed fully invested because their brokers told them you can’t time the market.”

Buy-and-Hold doesn’t work. That’s what he is saying. The harsh way of putting it would be to say “Buy-and-Hold is a lie.” The charitable way of putting it would be to say “Buy-and-Hold is a marketing gimmick.” In any event, those who follow Buy-and-Hold strategies never achieve good results in the long term.

We have 140 years of return data available to us and there has never yet been an exception. Stocks always do well in the long term when purchased at moderate or low prices and stocks always do poorly when purchased at high prices.

But wait.

Everyone supports Buy-and-Hold. The experts support it. Financial journalists support it. Our friends and neighbors and co-workers support it. Most personal finance bloggers support it. All these people cannot be crooked. There must be something to it.

Please read the excerpt from Arends’ column again. There is nothing to it. Buy-and-Hold is a myth. It’s “hooey,” in Arends’ words.

To understand why this myth has become so popular, you need to consider an important respect in which the stock market is different from the used-car market.

In the used-car market, the price of the car being sold is the result of a battle waged between the car seller and the car buyer. The seller wants a high price. The buyer wants a low one. Each side has to give something or risk seeing the negotiation fall through. The end result of the battle is usually a price that is more or less right. The car-selling market works.

It doesn’t work that way in the stock-selling market.

Have you ever heard anyone cheer low stock prices? The magazines love bull markets. So do the experts. So do the bloggers. So do your friends and neighbors and co-workers. So do you.

So the stock market is not really a market. Or, if it is, it is a very unbalanced market. A market in which everyone is pushing for higher prices. A dysfunctional market.

What happens is that stock prices go up and up and up for about 20 years. By that time, the market price is so far off from what it should be that we experience an economic collapse. Then we see 20 years of poor returns. Then we start the cycle over again.

There’s only one way to end this madness. We need to tell people the truth about stock investing. We need to let people know that stocks are a great investment when prices are moderate or low and a horrible investment when prices are high. If people knew that, prices would be self-correcting. Once prices got too high, enough investors would sell their stocks to bring prices back to fair-value levels. We would never again see out-of-control bull markets or the economic crises that inevitably follow from them.

We need people like Arends telling us the straight story. If we all came to learn how stock investing works, we could earn far higher returns while taking on dramatically less risk. We would all be living in Investor Heaven.

I can point you to academic research showing that all I am saying here is so. The data shows that we all could retire five to ten years sooner if only we could bury the Buy-and-Hold Myth 30 feet in the ground, where it can do no further harm to humans and other living things.

Why don’t more experts tell us the straight story?

We get mad at them when they do. We like to pretend that the phony prices that apply for stocks during bull markets are real. When experts tell us how to invest so that we can retire five to ten years sooner, we become enraged at them for popping our fantasy beliefs about stock investing. So not too many dare to do this. Arends is very much an exception.

What’s the answer? We need to let the experts off the hook. We need to let them know that we want to hear the truth from them, even if it hurts a bit to learn that we were taken and that we have done great harm to our financial futures by investing foolishly. It’s only by admitting our mistakes that we can begin to do better.

Buy-and-Hold is a myth. We need to start talking about this harsh and promising reality. it’s harsh because it is a reality that it hurts to accept. But it is promising too because we now know of far safer and more effective investing strategies that we would enrich us all if only we could work up the courage to leave the Buy-and-Hold Myth behind.

 

Rob Bennett developed The Stock-Return Predictor, a stock valuation calculator. His bio is here.

 

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83 thoughts on “The Buy and Hold Myth

  1. Buy and hold is not true for all the scenarios but Buy Intelligently and Hold should hold for most of the scenarios. Now “Intelligently” would be a very wide term so let me set a boundary for it
    – check the past history of company where you are investing
    – do not buy overvalued stocks
    – do not invest all your savings in market. Diversify your investment.
    – know how much loss you can take.

    I am still in learning stage so please correct me if I am wrong in any point

  2. Thanks much for stopping by, Karunesh.

    Your comment points to an important distinction.

    There are many who hear the phrase “Buy-and-Hold” and think of the strategies that Warren Buffett employs so successfully. There is a surface similarity to what Buffett does and what the Buy-and-Hold indexers do. But the deeper reality is that the two strategies could not possibly be more different.

    Buffett’s great insight is that you cannot tell whether a strategy has worked by going with it only for a year or two or three. Stock prices are random in the short term. Intelligent analysis pays off only in the long term. So it is essential to focus on the long term and stick with your choices long enough for them to pay off.

    Buffett performs an analysis of whether a stock purchase is a good idea or not and then sticks to his guns once he makes a decision. That’s what works. Buffett is right on.

    The Buy-and-Hold Indexers fail to perform any assessment of the value of their purchases before making them. The way you evaluate whether an index fund is worth buying or not is by looking at the valuation level that applies at the time. They do not do this. So Buy-and-Hold Indexers buy stocks both when they represent a great value proposition and when they represent a terrible value proposition. Then they stick with the choice for many years.

    In those cases in which the initial purchase price was reasonable, they always do well. The entire 140 years of historical data shows this.

    In those cases in which the initial purchase price was not reasonable, they always do poorly. The entire 140 years of historical data also shows this.

    The Buy-and-Holders do great for five or ten or fifteen or twenty years. But then they get horrible returns for five or ten or fifteen or twenty years. They give back most of their gains. We only get 40 years or so to finance our retirements. Giving up on half of them won’t get us to where we need to go.

    The “hold” part of Buy-and-Hold is pure gold. It is the “buy mindlessly” part that ruins those who follow this strategy. You don’t want to buy mindlessly. You want to make a long-term investment in an index fund only when that fund is selling at a reasonable price.

    Stock pickers can do well at any time if they truly know what they are doing because there are always some stocks that are well-priced. But it takes a lot of work. My view is that the typical middle-class person is better off in index funds (when they are selling at reasonable prices).

    Please take care.

    Rob
    Rob Bennett recently posted..Beyond Buy-and-Hold #85 — The Last 11 Years Have Been Lucky Ones for Stock InvestorsMy Profile

  3. I’ll keep my thoughts to myself because we can just agree to disagree.

    Instead of opinion I do prefer to go on factual evidence: I’d have to go back and look at the time-frame but it was either over the past 10 years or 20 years (pretty sure it was 20 years), but the FACTS revealed: those that STAYED in the market averaged 9.3% while those investors (“sophisticated” with a minimum of $100k in their account) who tried to time the market averaged 3.5%.

    The reality is that over the last 20 years there have been 40 days that netted all of the returns. If you buy-and-sell (time the market) it’s highly unlikely you’ll time it properly (despite what all of the “experts” and traders will tell you). If somebody actually KNEW what the market was going to do, or what a particular stock was going to do, they’d be sitting on the beach in Fiji while they chilled at their 5-star resort making trades all day.
    WorkSaveLive recently posted..Recipe: Southwest Quinoa SaladMy Profile

  4. I’ll keep my thoughts to myself because we can just agree to disagree.

    I greatly appreciate the spirit in which you put forward your comment, WorkSaveLive.

    You’re being polite. You’re being warm. You’re helping us all out by providing balance to the discussion.

    My wish is that you could take it one step further and actually engage in (and encourage others to engage in) a full-fledged DEBATE of these questions. I sincerely believe that you would be excited and pleased to learn what you would learn. I would be thrilled to post a guest blog entry at your site and I would be thrilled to host a guest blog entry by you at my own. Can we be friends who disagree?

    Buy-and-Hold was developed by smart and good and hard-working people. Bogle is one of my heroes. I love Bernstein’s work. I think Scott Burns has made great contributions. I think Larry Swedroe has made important contributions. I think the book A Random Walk Down Wall Street is a classic. I view Fama’s insights as huge.

    What many people are missing is that we just didn’t know all there was to know about stock investing in the early 1970s, when A Random Walk was published. The Buy-and-Holders were the first investment analysts to use legitimate research and data to guide their strategies. They put us on a better path and we all should be grateful to them for that and for all the genuine insights they really did develop.

    But they were human. They didn’t get it all right on the First Draft. There is new research that few of us have ever even heard about that presents a very, very strong case that some of the things you deeply and sincerely believe about stock investing simply are not so.

    You believe that it is not possible to time the market. There is indeed 140 years of data showing that short-term timing never works. That’s the second most important insight ever developed in this field. But that same 140 years of data ALSO shows that long-term timing ALWAYS works. That cannot be a coincidence. This second finding, that long-term timing always works, is the most important insight ever developed, it is even of more importance than the finding that short-term timing never works.

    I have run the numbers. Investors who understand that long-term timing always works reduce the risk of stock investing by 80 percent by taking that insight into consideration. 80 percent! This is so huge that I cannot possibly exaggerate how important it is.

    I think we should be talking about it. If I’m wrong, surely someone will be able to show that I am wrong and I will of course drop it. But what if I am right? If I am right that it is possible today to reduce the risk of stock investing by 80 percent, don’t you want to know how it is done and share that with your readers?

    Anyway, thanks for hearing me out. I truly do appreciate your kindness in posting your thoughts rather than just ignoring my words. Perhaps I really am wrong. Perhaps your post will be the thing that will cause me upon further pondering to reexamine my thinking and to see the flaws in it.

    I wish you the best in all your future life endeavors, WorkSaveLive!

    Rob
    Rob Bennett recently posted..Beyond Buy-and-Hold #86 — It’s Not That Big a Deal WHEN You Change Your Stock Allocation So Long as You Are Certain to Change It From Time to TimeMy Profile

  5. I tend to agree that ‘buy & hold’ is largely an invention of the Wall Street marketing machine rather than a true, science-based strategy. However, telling people to abandon buy & hold without also providing a CONSISTENTLY RELIABLE mechanism for judging when prices are ‘high’ or ‘low’ is rather unhelpful, don’t you think?

    In my opinion, virtually no one–and I include professional money managers and financial planners, not just average investors–can consistently forecast stock prices, or reliably ‘time’ the market, to put it another way. At virtually any point in the NYSE’s history up to the present moment, one can find so-called experts making arguments on either side of the bull and bear argument. How can the individual investor parse these arguments? Answer: He/She cannot.

  6. Hi Rob,
    We posted an article about market timing just last week, so I was eager to read your take on it! I enjoyed reading your article, and I always think it’s good to read opposing viewpoints on a topic, it gives the reader additional information and provides a new perspective on the issue. Out of respect to John, because he is such a nice guy (and has let us guest post before)I won’t post a link our post. However, you are welcome to stop by our blog anytime and leave a comment.
    Monica recently posted..Teaching Kids About Money: What Are Your Habits Teaching Them?My Profile

  7. I think there is a middle ground here, isn’t there? I believe your point is:

    – People ignore the rising risk of the stock market as prices inflate.

    – People believe the market is a safe place to be over long periods of time.

    Over the short term, swapping investments often isn’t feasible for smaller investors because of trading costs, so some length of buy-and-hold makes sense.

    Wouldn’t a strategy of buy-and-hold with safety nets in place be the logical conclusion? I do believe that the average investor places too much faith in their ability to time markets and their ability to produce winners. Once we realize we aren’t omniscient we begin to make good decisions about protecting our capital.
    AverageJoe recently posted..How to Lose 40% in No Time Flat!My Profile

  8. At virtually any point in the NYSE’s history up to the present moment, one can find so-called experts making arguments on either side of the bull and bear argument. How can the individual investor parse these arguments? Answer: He/She cannot.

    I relate strongly to these words, Kurt. To explain why, I am going to need to give some background on how I got onto the path I am on today.

    I was planning a form of early retirement back in the mid-1990s. The idea was that I was going to leave my high-paying corporate job to start an internet writing business. That’s obviously a high-risk move. But I was going to save enough so that we could cover all essential expenses with the earnings on our investments. I needed to earn money from the writing business only to cover vacations and new cars and this sort of thing.

    I worked nearly every night and weekend for nine years putting together this plan. I read all the literature. I did amazing things on the saving side (one year we saved 80 percent of our post-tax income). But I was stumped on the investing side. You would read three experts and you would get three wildly different opinions. This was driving me mad! I needed to do something with my money. And it seemed that being an expert didn’t give people the skills they needed to tell me what to do.

    The Buy-and-Holders came the closest to being the exception to that rule. The Buy-and-Holders were using research and data. So, when they said something, it was real, it counted. I LOVE what the Buy-and-Holders did. Please understand that as the base.

    Now —

    One of the things I needed to know about was safe withdrawal rates. The SWR is the amount you can take out of a portfolio each year with virtual certainty that your plan will not go bust. By reading John Bogle’s book, I discovered an error in the studies. So I put my plan together not based on the studies but based on what the studies would have said if they had been corrected for the error.

    Then I forgot about the investing stuff and started writing on the internet on saving strategies. I was a big hit. I was the most popular poster at the entire Motley Fool site for about two years. I built the most successful discussion board at that site, the Retire Early board. We had an amazing group of people there.

    In May 2002, I finally told my community members about my safe withdrawal rate findings. The board split in two. One group (a small group) said that the discussions we had about SWRs were the most exciting discussions we had ever had. The other group (a large group) demanded that I be banned from the site because I had dared to question the beliefs of the Buy-and-Holders. I hadn’t realized this is considered a crime in some states in the Union.

    In the 10 years since, I have seen this same general reaction over and over again. I have had a large number of big-name experts write me and tell me that my stuff is the best stuff they have ever seen on investing. This hasn’t happened one time, it has happened dozens of times. And I have been banned at 15 different sites for sharing what I have learned. It is always the same people demanding that I be banned. It is always the Buy-and-Holders.

    I understand that you truly believe what you say when you say that the market cannot be effectively timed. I have had many smart and good people tell me this. There was one guy Larry, who I challenged to look at the materials at the site and then do a write-up on whether it overcame his skepticism (I told him that I would post his write-up at my site, regardless of whether he agreed with me or not). Larry and I ended up having numerous long conversations about this stuff. He told me that it is going to change the history of investing. It stood up to every test he could come up with.

    The name of the new strategy is Valuation-Informed Indexing. Everyone who has ever looked at it with an open mind has come around. It is NOT true that you cannot time the market. It is NOT.

    The problem is that people have always gone about it the wrong way. If you change your stock allocation with the expectation of seeing a benefit within one or two or three years, it will not work. That’s short-term timing. It never works.

    If you change your stock allocation for the right reasons with the expectation of seeing a benefit within 10 years or so, it will work. It has worked for 140 years.

    The difference in returns is HUGE. You can count on being able to retire five years sooner. In exceptional cases, you can retire 10 years sooner. And you never need to worry about investing in stocks again. If you follow this approach, you will know your long-term stock return in advance. Not precisely. But close enough to take 80 percent of the risk out of the investing project.

    People think this is too good to be true. I’m sorry about that. But it is what it is. I can’t do anything to make it not work as well as it works. I’m not going to apologize for telling people about the biggest advance in the history of investing analysis.

    The big problem I have is that this drives Buy-and-Holders crazy. They just reject out of hand the idea that the market can be timed. My view is that I am the one who is being true to the spirit in which Buy-and-Hold began. The idea was to go by what the research says. VII is rooted in the research of Yale Economics Professor Robert Shiller. The Buy-and-Holders ignore Shiller’s research. That’s not the scientific way to proceed. If you believe in research, you should consider ALL the research, not only the research that was done prior to 1981.

    I’ll leave you with one last thought. Shiller has said publicly that he has never told us all that he knows about stock investing. Why? He said that, if he told us all he knows, he would be viewed as “unprofessional.” That’s how hostile the Buy-and-Holders have gotten with their criticism of new findings. Shiller is a tenured professor at gosh-darn Yale University and he dares not tell us what we need to know to invest effectively because he knows what the Buy-and-Holders will say about him if he does.

    Buy-and-Hold has become the opposite of what it was starting out. The initial idea was to look at the data to learn what really works. Now it is just shouting at people to stop them from getting the word out about things the Buy-and-Holders did not know in the early days because the research has just not been done yet.

    We don’t know it all, Kurt. If we could all just acknowledge that, we could have some amazing discussions. Humankind ADVANCES in its knowledge over time. We haven’t had any advances in this field for decades not because people have not been doing amazing research that takes us to amazing places but because the Buy-and-Holders have become so hostile to any findings that don’t fit what they thought they knew for certain back in 1974 that no one dares to “cross” them by telling people about the wonderful advances.

    My beef with Buy-and-Hold is that things have reached a point where we need to bury it 30 feet in the ground before we can look at what the last 30 years of research shows us. We need that new information. Imagine where we would be if we had not permitted computer technologies to advance for the past 30 years. In a pretty crumby place. That’s where we are in investing analysis today. Not because we are not capable of doing a lot better. Because doing a lot better offends those who didn’t know it all through no fault of their own back in 1973.

    You know those safe withdrawal rate findings of mine that I posted about in May of 2002. They have recently been written up in Smart Money. And in Business Week. And in Money magazine. And in the Wall Street Journal. There is now a consensus in the field that I was right. Why did all the big shots get to this 10 years after some guy whose only expertise is that he figured out how to get stuff posted to the internet? They are all afraid to say anything that offends the Buy-and-Holders. Anyone who doesn’t live in that fear can shoot years ahead with little effort.

    It’s very, very, very. very sad. But the other side of the story is that, once we shake off this nonsense, we will all be discovering some very, very, very, very exciting stuff. The economic crisis comes to an end when we agree that we want it to come to an end enough to question the dogmas that the Buy-and-Holders came up with by looking at the research that was available to them in 1974.

    Rob
    Rob Bennett recently posted..Beyond Buy-and-Hold #86 — It’s Not That Big a Deal WHEN You Change Your Stock Allocation So Long as You Are Certain to Change It From Time to TimeMy Profile

  9. Wow, people had big comments to say on this. My comments are (1) Dang, just when I thought I was starting to get a handle on investment stuff, and (2) This implies that I can’t just invest my money and walk away for 30 years when I retire, this implies that I have to take charge and watch the market and act accordingly. Ugh. Although, it IS my money, I should be watching it!

  10. I think there is a middle ground here, isn’t there?

    There IS a middle ground, Average Joe.

    I’ll tell you what I think has caused us problems finding it.

    Buy-and-Holders use NUMBERS to make their point. The entire idea is to root your strategies in the hard stuff, not opinions but data.

    I do the same thing. The only difference is that I use the numbers you get when you believe in Yale Professor Robert Shiller’s research rather than the research of University of Chicago Professor Eugene Fama’. The only difference between the two schools of thought is that Shiller thinks valuations matter while Fama believes that it is impossible for stocks to be overvalued or undervalued (Fama put forward the Efficient Market Hypothesis, which posits that stocks always reflect all knowledge about them, which is another way of saying that they are always properly priced).

    This is no small difference. There are times when the Buy-and-Hold Model would tell you that the best possible stock allocation is 80 percent stocks and the Valuation-Informed Indexing Model would tell you that the best possible stock allocation is 20 percent. That’s a difference of 400 percent!

    Both models cannot be right. One is right and one is wrong (it’s a theoretical possibility that both are wrong).

    I think the middle ground is that the Buy-and-Holders and the Valuation-Informed Indexers should always show respect and affection for each other, present their cases to the best of their ability, and leave it to each investor to decide what he or she wants to do with his or her money.

    The trouble with this is that people become very anxious knowing that they have invested their retirement money according to one model and that there are people advancing another model which indicates that they are making a terrible mistake.

    Questioning the ideas by which people have invested their retirement money causes those people emotional pain. That’s the downside here.

    The upside is that we learn by hearing different points of view. Moving forward requires that we subject ourselves to a little emotional discomfort in the short term so that we can reap huge rewards in the long run.

    Rob
    Rob Bennett recently posted..Beyond Buy-and-Hold #86 — It’s Not That Big a Deal WHEN You Change Your Stock Allocation So Long as You Are Certain to Change It From Time to TimeMy Profile

  11. This implies that I can’t just invest my money and walk away for 30 years when I retire, this implies that I have to take charge and watch the market and act accordingly. Ugh.

    It’s not that bad, TB. I promise!

    It’s true that you can’t walk away for 30 years. But the number of allocation changes that are needed to attain MUCH higher returns at GREATLY reduce risk is one every 10 years ago or so on average. We are talking minimal effort here. And the payoff is so big for putting in that extra effort that asking whether it is worth it or not is like asking whether it is worth it or not to take the price to the place where you bought your lottery ticket so that you can pick up your winnings. It’s worth it!

    The daily ups and downs of stock prices are meaningless. They are a distraction. They are noise. This is the part that John Bogle got 100 percent right. Please do not think that I am asking you to pay attention to that nonsense.

    I am asking you to pay attention to the difference between how stocks were priced in 1982 and how they were priced in 2000. The data shows that, when stocks are priced as they were in 1982, the most likely annualized 10-year return is 15 percent real. In contract, when stocks are priced as they were in 2000, the most likely annualized 10-year return is a negative 1 percent real.

    What stock allocation makes sense both when your long-term return is 15 percent real per year and when your long-term return is a negative 1 percent real per year. There is none! 90 percent works when the return is 15 percent per year but is horrible when the return is a negative 1 percent per year. 30 percent works when the long-term return is a negative 1 percent per year but is horrible when the long-term return is 15 percent per year.

    You need to be willing to CHANGE your stock allocation (that is, ignore the marketing pitches for Buy-and-Hold) when stocks go from selling at one-half of their fair price (as they were in 1982) to selling for three times their fair price (as they were in 2000).

    Stocks were selling at good prices from 1975 to 1995. So you did not need to make any changes for those 20 years. Stocks have been selling at poor prices from 1996 through today. So you did not need to make any changes for those 16 years.

    Being willing to make one allocation change every 10 years or so on average will let you retire many years earlier. It will also let you avoid all the emotional angst that Buy-and-Holders go through when they see their portfolio values crash. Valuation-Informed Indexers lower their stock allocations prior to crashes. ALL lasting crashes come at times of super-high valuation levels. There has never yet been a single exception to the rule. That’s because it is super-high prices that CAUSE crashes.

    Crashes are not random events. So they can be easily avoided by those willing to give up Buy-and-Hold thinking. Stock returns are highly PREDICTABLE in the long term. So those willing to look at prices before buying (I wonder why The Stock-Selling Industry is so opposed to this idea!) always have a good idea in advance of buying stocks what their long-term return is going to be.

    Rob
    Rob Bennett recently posted..Beyond Buy-and-Hold #86 — It’s Not That Big a Deal WHEN You Change Your Stock Allocation So Long as You Are Certain to Change It From Time to TimeMy Profile

  12. Thanks for letting me know about the article, Monica, as well as for your warm words. I will certainly go over there and take a look and let you know my thoughts. I may not be able to get to it today, but I certainly will by tomorrow if not today.

    I will be giving a presentation about these matters at the Financial Bloggers Conference in September. I attended the one held last year in Chicago and it was great to be able to meet my fellow bloggers in person. If by any chance you are attending, please let me know and we can set up a time to get together and talk thing over (that of course applies to any of my fellow bloggers who happen to be listening in on these words).

    The Personal Finance Blogosphere has a great opportunity here, in my assessment. We have made a huge difference in the frugality area. People are broke because the credit card companies use all sorts of marketing materials to encourage them to spend more than they should. Money bloggers have helped people overcome the power of the marketing pitches by making a personal case showing how saving can be as fulfilling as spending.

    I’d like to see us do the same thing in the investing realm. A lot of bloggers are intimidated by investing. They feel that they are not “expert” enough to question the conventional wisdom. No! Effective investing can be very, very simple today. We can all tell people all they need to do in a few hours. The tricky part is helping people see the tricks in all the marketing messages put out by the experts. It’s the “expert” stuff that is doing everybody in.

    We can change the world for the better.

    I know that’s an idealistic thing to say. In this particular case, it also happens to be a true thing to say. If you think I am talking out of my hat, please check out my site. I have worked this issue 10 hours per day for seven days per week for 10 years running now. I’m not a b.s. artist. This is the real thing. Check out the “People Are Talking” section on the left-hand side of the home page of my “A Rich Life” blog if you want to see what a good number of the biggest names in the field (including academics, who do the actual research) have to say about me.

    Anyway, I promise I will get back to you, Monica. I will either comment at the article at your blog or send you an e-mail, depending on my reaction to the piece.

    Please take care.

    Rob
    Rob Bennett recently posted..Beyond Buy-and-Hold #86 — It’s Not That Big a Deal WHEN You Change Your Stock Allocation So Long as You Are Certain to Change It From Time to TimeMy Profile

  13. Holy cow! I want to comment, but I’m afraid I’ll have to spend half the night reading the response!

    I think it is awesome Rob that you are this passionate about this subject. Right or wrong, matter of opinion or not, you can tell that you really care about this.

    My observation about the post is that when you talk about “the market,” you are really vague. There are several different types of investments within the market, as you know. Without going into details, I think some do make sense to buy-and-hold.
    Matt recently posted..Passive Income AspirationsMy Profile

  14. I’m afraid I’ll have to spend half the night reading the response!

    Sorry about that, Matt! No one can say I don’t give full value for the money!

    Right or wrong, matter of opinion or not, you can tell that you really care about this.

    Thank you for that kindness.

    when you talk about “the market,” you are really vague. There are several different types of investments within the market, as you know.

    I am talking ONLY about a broad market index, such as a Total Stock Market Fund or a S&P fund.

    Valuation-Informed Indexing does NOT work for individual stocks.

    It might work to a limited extent for subsets of the market like small cap or whatever. But I personally would not use it on a subset.

    The reason this is so exciting is that it provides a very simple way for average people to obtain much better returns at significantly reduced risk. Those who study the markets in depth can probably do better. But I think there is a real need today for an investing strategy that is smart, simple and safe. I believe this fits the bill.

    Thanks much for stopping by, Matt. You made me laugh with your gentle reminder not to go on too long. I am indeed passionate re this topic. Heaven help me!

    Rob
    Rob Bennett recently posted..Beyond Buy-and-Hold #86 — It’s Not That Big a Deal WHEN You Change Your Stock Allocation So Long as You Are Certain to Change It From Time to TimeMy Profile

  15. I’m going to stick with the ‘myth’ be a millionaire someday and sleep well at night all along the way.

    Thanks for stopping by and sharing your thoughts, Brent. I can tell you that there are many, many smart and good people in your camp. My views are very much a minority position today.

    Please take care.

    Rob
    Rob Bennett recently posted..Beyond Buy-and-Hold #86 — It’s Not That Big a Deal WHEN You Change Your Stock Allocation So Long as You Are Certain to Change It From Time to TimeMy Profile

  16. In the used-car market, the price of the car being sold is the result of a battle waged between the car seller and the car buyer. The seller wants a high price. The buyer wants a low one.

    Just like the stock market.

  17. Initially, I thought this was an interesting, yet highly debatable post.

    Then I was struck by how LONG Rob’s post and reply is compared to what he actually says.

    Then I was encountered the material above in which he describes being banned from boards for supposedly expressing a contrary opinion. That’s something I don’t think I’ve ever seen before. In fact, the people that claimed it was so always turned out to be major problem children for boards.

    At that point, I simply googled “Rob Bennett financial”. The results are startling. It turns out that Rob has a long and VERY interesting history.

    I’d urge you all to check him out before putting weight on his statements.

  18. Just like the stock market.

    We don’t happen to agree re that one, Evidence, for the reasons I described above. But I am certainly grateful to you for sharing your thought that I might be wrong. I’ve been wrong about lots of things in the past. And, if it were happening once again, I would in all likelihood be the last to know.

    My best wishes to you.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  19. Rob,

    Enjoyed the article. Let me toss my slightly more than 2 cents into the mix.

    I believe that stocks can be undervalued. Looking at my own returns I’ve either been good or lucky, and at this point in my investing career I’m leaning towards good.

    I think the truth is that there is an equity drift rate which is usually more than the drift rate for bonds by some risk premium. The times you reference above, the under-performing times, come soon after that risk period disappears for whatever reason – boom times, bubbles, irrational exuberance – whatever you want to call it. Once you think investors start to feel that they can do no wrong in the stock market, hopefully you’re not too late to rethink your strategy.

    Onto buy and hold. High information investors, like some bloggers (and obviously yourself) will be able to look objectively at the situation and draw some simple conclusions. For example, the difference between the earnings yield on the S&P 500 and a 10 year treasury is about 5 % – so I know I’m buying into better valuation than even a short time ago. The same thing with housing. I’m in the annually overpriced Bay Area, but last year, with rents in the neighborhood I purchased in finding parity with the payment on a 30 year mortgage, I decided to buy. Only time will validate if I made a choice, but clearly I bought with valuations half of their peak.

    Buy and hold investing, then, works more for low information voters… who I would argue covers most of the population. These are the people who may talk about stocks at a party, act on tips from random people they come across, and generally not develop investing ideas themselves. When they own individual stocks, they tend to churn them at any sign of bad news – compounding down days with transaction fees. This is the type of person who buy and hold works well for.

    IIRC, there has been 1 10 year period that had < 0% return on the S&P 500 (1928-1938), although a few recent periods only barely broke even after dividends. We can say that if we can entice low information voters to buy and hold, they'll often be better off than they would be after a few subjective moves. My cowriter (an Economist who owns individual stocks, for the record) recently posted an article which said that if someone had bought in the S&P 500 for 20 years they would have made 8.4% – not that great a return. Market timers, on the other hand? 1.9%. That means that in the group of people trying to time the stock market are a lot of low-information investors acting on impulse and not some valuation criteria.

    So here's where I stand: if you can stomach the down days and have a completely objective valuation method for the market (high information investors) you can tell when the risk premium is eroding, and move to other asset classes. If you identify with the low information voters? You're better off setting it and forgetting it – and it's not giving up, it's just recognizing your weaknesses as an investor.

    We all need to save, and some of us will naturally be better than it that others. Of course, if everyone was exactly the same skill level at investing, then everyone would have 'average' returns. The high information investors may continue to outperform (I'm thinking practitioners like Ed Thorp, Warren Buffett and the like here, not investing theorists), but for the most part low information investors are at least capturing some positive return, even if it's not as high as it could be.

    Dividing people? Silly? Let me know. Now I have to write a full, formal article about it, haha. Thanks for the thoughts.
    PK recently posted..Optimal Asset Allocation with the Kelly CriterionMy Profile

  20. We can say that if we can entice low information voters to buy and hold, they’ll often be better off than they would be after a few subjective moves.

    Thanks for putting forward those exceedingly thoughtful comments, PK.

    I understand your point. You are making the entirely valid observation that low-information investors are inclined to engage in short-term timing and we need to discourage that or they will get killed. I’m with you. 100 percent.

    I’m saying that Buy-and-Hold is not the only alternative to short-term timing. Valuation-Informed Indexing is another alternative, a better alternative. The only reason we didn’t go with VII at the time Buy-and-Hold was being put forward is that the research needed to develop the VII concept did not exist at the time. Buy-and-Hold was a big advance over short-term timing. VII is a big advance over Buy-and-Hold.

    I believe that it was the promotion of Buy-and-Hold that served as the primary cause of the economic crisis. In 2000, the market was overpriced by $12 trillion. Even John Bogle, the King of Buy-and-Hold, acknowledges that overpricing disappears over the course of about 10 years (he calls Reversion to the Mean an “Iron Law” of stock investing). So we knew in 2000 that somewhere near the end of the first decade of the 21st Century our economy was going to experience the loss of roughly $12 trillion in buying power. Was there any hope whatsoever that we would not enter a very deep and long-lasting recession or even a depression once things reached that point?

    Why let things reach that point?

    If we told people about Shiller’s research (and developed tools to help them implement the insights), there would never again be another bull market. Each time prices started to get out of hand, a group of investors would sell enough stocks to bring prices back to fair-value levels. In a world in which there are no bull markets, there are no bear markets either (bear markets are the stock market’s way of getting back to fair-value prices when those darn Buy-and-Holders just outright refuse to lower their stock allocations) no matter what. And in a world of no bear markets, there are in all likelihood no more economic crises (the four economic crises we have seen since 1870 all followed on the heels of huge out-of-control bull markets and were initiated by the price crashes that such bull markets make inevitable).

    Economic crises are optional. They are not something that happen to us for no reason. They happen because we are all drawn to Buy-and-Hold strategies. We want to believe that the portfolio gains we see in bull markets are real. So we ignore the research showing that this is not so and go ahead and spend the phony gains. Then the phony gains disappear from our portfolios and we become afraid to spend and our entire economic system collapses. Is this any way to run a railroad?

    People complain that stocks are risky. But it doesn’t have to be that way! Stocks are risky because of the wild price swings. But there would be no wild price swings if investors knew to sell once prices started getting out of hand. Stock prices are self-regulating in a post-Buy-and-Hold world. We need to have a brake on price rises. The natural break is that investors sell whenever prices get so high that better returns are available through far safer asset classes. But Buy-and-Holders refuse to sell, no matter what. I think we should just tell people how bad the deal on stocks is when prices go through the roof and encourage them to sell so that we do not end up in another economic crisis.

    Fama envisioned an efficient market. I don’t think the market is efficient today. But I think it could be efficient, I think it should be efficient. The only thing holding us back is that most of today’s investors don’t realize how much sooner they could achieve financial independence if they were willing to abandon Buy-and-Hold strategies. The gains that follow from being willing to take price into consideration when buying stocks are huge.

    I fully understand that the low-information investors do not know this. But what if we told them? What if 90 percent of the personal finance bloggers were working hard to get this message out, just as 90 percent of us are working hard to warn people not to take on too much debt? People are losing a lot more money by following Buy-and-Hold strategies than they are by taking out credit cards. The numbers are shocking. We are talking about losses in the hundreds of thousands of dollars, in some cases it is in the millions.

    My take is that this entire problem is just the result of unfortunate timing. If Shiller had published his research in 1971 rather than 1981, we would all be Valuation-informed Indexers today and we would be a far richer society than we are. Things got on the wrong track when The Stock-Selling Industry spent hundreds of millions promoting Buy-and-Hold and now the “experts” in this field just don’t want to acknowledge having made a mistake. But what kind of expert are you really if your advice fails to take into consideration the last 30 years of academic research?

    Please understand that that’s only one fellow’s sincere take. Lots of smart and good people disagree with me. I very strongly believe that I am right about this but no one ever knows for sure. That was a super comment in any event, PK.

    This is an amazing community. You should be very proud of what you have assembled here, John.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

    • Thanks Rob – I am glad that everyone was so engaged on the topic. I love seeing so many PF bloggers who offer such high quality content on their own sites come here to weigh in.

  21. But there would be no wild price swings if investors knew to sell once prices started getting out of hand.

    The entire history of capital markets shows that this is wrong.

    And if by some miracle wild price swings did end, and hence the risk of stocks was reduced, then investors would bid up prices thus reducing returns.

  22. Kurt @ Money Counselor says April 25, 2012 at 10:48 am

    I tend to agree that ‘buy & hold’ is largely an invention of the Wall Street marketing machine

    Really?

    It seems to me that Wall Street is all about getting churn — buying and selling, not buying and holding!

    Can you explain why you would think this is the case- – examples, links, studies, ANYTHING that might indicate that Wall Street is actually putting a thin dime into marketing any other approach than trying to get customers to make lots of transactions, on which brokers earn fees.

    • Sure. How much money do you suppose is generated for money management firms by the average actively managed mutual fund fee (~1.5%?) x all the money in mutual funds? This revenue is unrelated to ‘churning,’ but strongly related to the sum total invested in mutual funds. Money managers advocate ‘buy & hold’ in part because it helps secure individual investors’ money in their mutual fund accounts–where it’s subject to fees. Investors who sell when they think stocks are high or when they get scared reduce mutual fund holdings, which reduces fees, both in the short term and potentially in the long term if they never come back.

      In short, ‘buy & hold’ will produce the highest average mutual fund balances over time which translates to the highest mutual fund management fees.
      Kurt @ Money Counselor recently posted..Income-Based Student Loan RepaymentMy Profile

      • Sounds like Vanguard direct is the way to go then, and cut out any middle men gouging out fat profits for just buying what you could already get for yourself..

  23. The entire history of capital markets shows that this is wrong.

    Yes and no, Evidence.

    You are certainly correct that we have always had wild price swings up and down in the past. That is indeed the history.

    But are there not other fields in which mankind’s knowledge has increased over time and in which all of our lives were thereby made different and better? If the Wright Brothers never tried to fly an airplane, we would not today be able to go from Washington, D.C. to Los Angeles in three hours. If Steve Job never took advantage of new technologies to build the IPhone, the people at my boy’s little league game would not be able to go on the internet to check the weather report. Things change. Sometimes for the better.

    There are three things we have today that we have never had at any earlier time in the history of stock investing:

    1) We have a research-based model that gets nine-tenths of the story right. Before the Buy-and-Holders came along, there was no body of systematic research that examined how stock investing works. We obviously were never going to figure things out when all we had in this field was a bunch of subjective opinions. The Buy-and-Holders did something huge when they rooted their approach in research and data. They provided us the foundation that we needed to be able a few years later to go to some truly amazing places;

    2) We have index funds. You can’t have Valuation-Informed Indexing without index funds, right? Well, there were no index funds until John Bogle founded Vanguard in 1976. Bogle started a revolution. I don’t think even he realizes yet just how far-reaching an advance the indexing concept is; and

    3) We have Shiller’s research showing that valuations affect long-term returns, supplemented by the research of Russell and Arnott and Pfau and Smithers and Asness and Easterling and Kitces and Grantham and Alexander a good number of others. We obviously could not take advantage of Shiller’s insights until he provided them. Well, he has now provided them. Why not start taking advantage?

    We agree that it is a fact that stocks have always been a risky asset class in the past, Evidence. I do not believe that there is any rule of the universe that says that this must forever remain a fact. I believe that we now have pieces of the puzzle that were not available to us in earlier days and that we are today on the threshold of exploring implications of Shiller’s research that will permit us to reduce the risk of stock investing by roughly 80 percent.

    Like Joe Biden said , it’s a big freakin’ deal!

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  24. permit us to reduce the risk of stock investing by roughly 80 percent

    The point that you seem to be missing completely is that the price that someone would be prepared to pay for a risky asset is different than the price that they would be prepared for the same asset with 80% less risk.

    They would be prepared to pay more for the 80% less risky version and by paying more (and therefore reducing the yield) they would reduce their return.

  25. And if by some miracle wild price swings did end, and hence the risk of stocks was reduced, then investors would bid up prices thus reducing returns.

    Are you sure?

    I understand the point you are making, Evidence. If stocks become a virtually risk-free asset class, something has to give. We cannot have stocks providing a return of 6.5 percent real with little risk and have Certificates of Deposit (CDs) providing a return of 3 percent real with little risk.

    You are assuming that the return on stocks would come down to match that of CDs. I think it would happen the other way around.

    I believe that the return on stocks is fixed. It is determined by the productivity of the economy. So long as our economy remains roughly as productive as it has always been, stocks are going to provide a long-term average return of something in the neighborhood of 6.5 percent real.

    But the returns on CDs are not fixed. CD returns are determined by market forces. Banks can get away with paying a low rate of return on CDs because people only turn to them when they are afraid to invest in stocks and those not willing to invest in stocks don’t have too many options.

    But the market for CDs would change dramatically in a world in which the risk of stock investing had been reduced by 80 percent. The reality is that the money you give to a bank to obtain a CD is being invested by the bank in productive activities that are bringing in a return of something in the neighborhood of 6.5 percent real. The bank just isn’t sharing much of the return with you because it doesn’t have to. Those who are afraid of stocks have to take what they can get. The banks can offer a return of 3 percent real or less and still get takers for CDs.

    The CD market changes in a world in which the riskiness of stocks has been greatly reduced. In that world, the banks would have to share more of the return with CD holders or they wouldn’t be able to sell their CDs. They would not have to match the 6.5 percent real return for stocks. Stocks will always be at least somewhat more risky than CDs. But I can see a future in which stocks will be far less risky than they are today and CDs will be providing far better returns than they are providing today, returns only perhaps two percentage points less than the return provided by stocks.

    I’m not saying I know these things for certain. I believe these things. All of these things follow logically from a belief in Shiller’s findings and the follow-up findings of many other researchers. I believe that we should all be talking about these possibilities. If there is something to this stuff, we need to know that. If there is not, examining it closely will reveal the holes in the logic soon enough.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  26. The point that you seem to be missing completely is that the price that someone would be prepared to pay for a risky asset is different than the price that they would be prepared for the same asset with 80% less risk.

    We are coming at these questions from very different perspectives, Evidence.

    It is my view (and, yes, I could be wrong!) that you are making the mistake that Buy-and-Holders make over and over again: You are assuming rationality on the part of investors. You are describing how investors should behave. Is there any evidence in the historical record that investors have in fact ever behaved in the manner in which the Efficient Market Hypothesis says they should?

    I have a calculator at my web site that performs a regression analysis of the historical data to reveal the most likely 10-year annualized return for a stock purchase made at any valuation level. It reports that the most likely annualized 10-year return in 2000 was a negative 1 percent. Treasury Inflation-Protected Securities (TIPS) were paying a risk-free 4 percent real at the time. That’s a difference of 5 percentage points of return every year for 10 years running. The total differential is 50 percent of the initial portfolio value. Those who chose to invest heavily in stocks in 2000 took on a likely loss of 50 percent of their lifetime accumulated savings by doing so.

    Millions of people made this choice. Is that rational?

    In contrast, the calculator shows the most likely annualized 10-year return in 1982 was 15 percent real. But you couldn’t give stocks away in 1982. Business Week ran an article in that time-period titled “The Death of Equities.” Why would anyone want such a lousy asset class when all the “experts” of the day were able to point us to so many far more appealing alternatives?

    Shiller showed that stock investors are not rational. If we are rational, Fama is right — the market is efficent. But if we are not rational Shiller is right and valuations (that is, investor emotions) affect long-term returns.

    One of the two professors is right and one is wrong. We have to figure out which one is right. The difference we are talking about is no small thing. There are times when Fama’s model calls for an 80 percent stock allocation and Shiller’s model calls for a 20 percent allocation. No investor can go with both an 80 percent stock allocation and a 20 percent stock allocation at the same time.

    Both Fama and Shiller are respected academics. Both do high quality work. But they are saying opposite things. So they cannot both be right. The future of our free market economy depends on us getting this right. There are today millions of middle-class people following the Fama model because they are not even aware than another model exists. If Shiller is right and Fama is wrong, those millions of people are going to see a wipeout of their accumulated wealth of a lifetime over the next few years.

    In the grand scheme of things, Fama’s ideas (the ideas on which the entire Buy-and-Hold model are built) have only been around a very short period of time. Does it make sense to bet the future of our entire economic system on them, given that there is today 30 years of research by equally well-respected academics showing the precise opposite of what Fama’s research shows?

    I obviously think this is too big a risk. I think we have gone overboard in our enthusiasm for the Fama model. I believe we have jumped the gun. I think we all need to take a step back, get our bearings, and examine these matters more closely than we examined them the first time they were presented to us. I think that at the very least there is cause for serious doubt as to where Buy-and-Hold strategies can ever work in the long run.

    The subtitle of Shiller’s book characterize his research as starting a “revolution” in our understanding of how stock investing works. The book got rave reviews. It was a bestseller. So why isn’t every personal finance blog examining the ideas put forward in the book and the many far-reaching implications of those ideas? Why aren’t we telling our readers the other side of the story? Shouldn’t we tell them both sides and then let them make up their minds for themselves?

    How many articles have you even seen with the title “THe Buy-and-Hold Myth”? Is this the first? Why? Why aren’t there hundreds of people writing about this stuff today?

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  27. I believe that the return on stocks is fixed. It is determined by the productivity of the economy. So long as our economy remains roughly as productive as it has always been, stocks are going to provide a long-term average return of something in the neighborhood of 6.5 percent real.

    That is so wrong that it is beyond my abilities to explain it to you.

    I’ll let Bill Bernstein have a go.
    The Returns Fairy. . . Explained

    “Over the past century, the per-capita growth of GDP in the U.S., the world’s most successful economy, has been about 2% after inflation and shows no sign of acceleration in the past quarter century. It is impossible for long-term corporate growth to be higher than GDP growth for this would entail corporate profits eventually growing larger than the economy itself.

  28. Can you explain why you would think this is the case- – examples, links, studies, ANYTHING that might indicate that Wall Street is actually putting a thin dime into marketing any other approach than trying to get customers to make lots of transactions, on which brokers earn fees.

    This question was directed to Kurt, but I would like to respond as well, Carpet King.

    There’s no question but that some on Wall Street promote churning. The Buy-and-Holders criticize that and I think fairly so. But does that prove that the Buy-and-Holders cannot be guilty of pushing their own form of financial porn?

    I started out this article with a link to a column in the Wall Street Journal that makes precisely the point for which you are seeking confirmation. Are you really asking whether Wall Street promotes Buy-and-Hold? They promote it relentlessly Every time you hear some “expert” say that market timing doesn’t work, he is promoting Buy-and-Hold. Whenever someone says “you can’t beat the market,” he is promoting Buy-and-Hold. Whenever someone says that stocks are always best for the long run, he is promoting Buy-and-Hold.

    These are marketing slogans. They are half-truths. There are hyper-technical ways in which these slogans might be interpreted to support an argument that they are kinda, sorta true some of the time. But, as the Wall Street Journal article notes, “they are leaving out half the story.” The half they leave out will in all likelihood delay your retirement date by five to ten years, in the event stocks continue to perform in the future anything at all as they always have in the past.

    I don’t think it should be a question of promoting churning (short-term timing) or promoting Buy-and-Hold (no timing at all, neither short-term or long-term). I would like to see the “experts” in this field telling us all precisely what the research says, without ANY marketing spin. I can tell you without reservation that the Buy-and-Holders are NOT reporting accurately what the research says. There was once research that says what they say. But there is now 30 years of research going the other way and I think that is part of the story that we need to hear to be able to make informed decisions about what to do with our retirement money.

    The bottom line is that there is a lot of money in this field. People face strong temptations to tell us what sells rather than what works. I am the person who discovered the errors in the Old School safe withdrawal rate studies. That was 10 years ago. Today, there is a consensus in the field that I was right. My findings have been reported on in Business Week and the Economist and Smart Money and lots of other places. But for years I could not get anyone in the field to acknowledge the errors in the studies we all use to plan our retirements. I was shocked when a columnist wrote a column reporting on the reason why. He said: “It is information that most people don’t want to hear.” The primary expertise of the “experts” in this field is in marketing, not in knowing what works for the long-term stock investor.

    Now, perhaps that’s not so unusual. I wouldn’t trust a car salesman to give me the straight story re a used car. The difference here is that a lot of the journalists in this field (and a lot of the money bloggers too, I am sorry to report) play the role of stenographers for the stock salesmen/experts. We shouldn’t be just passing along their marketing slogans as if they were divine truths. We should be checking out what they say. We should be asking hard questions. That helps everybody, including the salesmen/experts. It keeps everybody honest. That’s the job of a personal finance blogger, in my assessment.

    I believe that Wall Street markets to one type of investor with the churning stuff and to another type of investor with the Buy-and-Hold stuff. My guess is that they did marketing studies that showed that there were millions of people who didn’t like the churning stuff and who would respond better to claims that were purported to be research-based. But they don’t tell us accurately and honestly what the research says. They spin in wild and dangerous (for us!) ways.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  29. I’ll let Bill Bernstein have a go.

    The Bernstein statement doesn’t conflict with what I am saying even a tiny bit, Evidence. Bernstein is one of the most important influences on my thinking. When people ask to know more about these ideas, I often suggest that they read Chapter Two of Bernstein’s book “The Four Pillars of Investing.”

    Bernstein was also one of the firsts to discover the errors in the Old School safe withdrawal rate studies, by the way. I remember a day when lots of people were questioning my findings re those studies and I was very happy to be able to quote Bernstein’s support of what I was saying. Bernstein is not perfect. I have caught him in mistakes here and there (we are all human, to be sure). But Bernstein’s stuff is quality stuff. He’s sort of half Buy-and-Hold and half Valuation-Informed Indexing. He walks the line (my guess is that he will become more of a Valuation-Informed Indexer as prices fall and Buy-and-Hold becomes less popular).

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  30. Then I was encountered the material above in which he describes being banned from boards for supposedly expressing a contrary opinion. </i?

    It's a stone cold fact that I have been banned from 15 different discussion boards and blogs, Jon. And the story gets a whole big bunch more amazing than that.

    The Bogleheads Forum is the largest discussion board on the internet. That board was founded to escape me! It's true. The community used to meet at Morningstar.com. I was one of the most popular posters but I was also intensely disliked (Oh, let's just say it — I was hated with a burning passion!) by a small but highly vocal group there. That group demanded that Morningstar ban me but Morningstar refused (I obviously never broke any rules). So this group started a new board and asked the entire community (except for me and any who had posted in support of me) to move over there.

    I have been banned from boards that I founded! That's really so. I posted at a place called NoFeeBoards.com. It was the same basic pattern. I was loved intensely by some, hated intensely by others. The owner set up a separate board for my "controversial" investing ideas and we built up a nice community there. But the people who didn't like me couldn't stand it that there was any section of the site at which my posts were permitted. They threatened to burn the entire site down. So the owner banned me from a board I founded.

    Tom Gardner is the co-founder of the Motley Fool site. Tom wrote one of the blurbs that appears on the back cover of my book on saving strategies. He wrote a glowing review of a report I wrote on retiring early and Motley Fool asked me to help teach a retirement course they used to offer at their site. But I was banned from Motley Fool too. There was a fellow at the board I built who had authored one of the Old School safe withdrawal rate studies and he vowed to disrupt every thread in which I posted. I asked the site administrator for help. He told me that it would be "ideal" if the other fellow would permit honest posting by all community members. When the other fellow threatened to kill my wife and children, Motley Fool banned me. They apologized in the e-mail in which they banned me. I think they were afraid of legal liabilities they would face if this fellow followed through on his threats.

    I'll be giving a speech to the Financial Bloggers Conference in September. One of my co-panelists (a great guy and a super smart guy) banned me from his site. He hated doing it. We exchanged about 20 e-mails as he tried to figure out what to do. He knew it was wrong to ban me. But his readers became upset when I reported on what the academic research of the past 30 years says about how stock investing really works. I thought this fellow summed it all up well when he said (I'm paraphrasing): "I write about investing, I don't want to be involved in death threats." I wish someone would tell the Buy-and-Hold dogmatics the news!

    This stuff stirs up a lot of emotions. People are scared that their retirement plans are going to fail. I am giving them research-based numbers showing them that that is indeed the case. I understand why people are upset. I just think they are upset at the wrong guy. I could help them get their plans back on track. People need to be able to acknowledge mistakes before they can get things turned around and adopt strategies in which they are able to feel more confidence.

    I view all this emotion as one of the reasons why Buy-and-Hold is not the way to go. A true research-based strategy would not make so many people feel so defensive.

    For those who would like to investigate this aspect of the question in more depth, I suggest you take a look at an article at my site in which I set forth comments made by 101 of my fellow community members who expressed a desire that honest posting on all the research be permitted at our boards and blogs:

    http://www.passionsaving.com/investing-discussion-boards.html

    I am very proud of the 110 assessments of my work put forward at the "People Are Talking" section of my site. I don't think it would be possible for me to have endorsements from multiple academic researchers (including a fellow from Columbia University!) if there were zero value to what I am putting forward:

    http://arichlife.passionsaving.com/

    If you are looking for an overview of the 10-year saga, this is the place to go:

    http://arichlife.passionsaving.com/about/

    Finally, it can be a lot of fun just to enter the phrase "Valuation-Informed Indexing" into the Google engine and take a look at what comes up. I have been writing three weekly columns on the VII concept at other sites for two years now and I have recorded 200 podcasts on it and I have about 100 articles at the site and I have written scores and scores of guest blogs and I have developed five totally unique calculators. So there is a lot of material in the vaults!:

    http://www.google.com/search?hl=en&source=hp&q=valuation-informed+indexing&aq=0&aqi=g1&aql=f&oq=valuation-in&gs_rfai=

    Anyway, it is true that I have been banned at numerous places. I don't think that says anything good about Buy-and-Hold. I find it a highly troubling reality. There shouldn't be such intense discomfort with the idea of exploring highly exciting and highly promising new ideas. I view this as a sign that we are living in the last days of the Buy-and-Hold concept. People are just desperately trying to hold onto something in which they don't feel any deep confidence.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  31. I don’t know about all this. Your views seemed interesting, until I got to the part where you’re banned from many sites by some conspiracy and people are threatening to murder your family. I’m sorry if this sounds rude, but this destroys your credibility with me.

  32. I don’t know about all this.

    You’re in good company with that one, Gary!

    When I started my column called “Investing: The New Rules” I titled the first entry “Today’s Knowledge of How Stock Investing Works Is Primitive.” My strongly held view is that it would be good if we all tried to take a more humble approach. When you think you know it all, you can’t learn. So we all need to acknowledge that there’s a lot we don’t know for sure.

    Your views seemed interesting

    Thank you for that kindness.

    until I got to the part where you’re banned from many sites by some conspiracy and people are threatening to murder your family. I’m sorry if this sounds rude, but this destroys your credibility with me.

    I see it just the other way, Gary. I feel that it does harm to the credibility of the people who endorse Buy-and-Hold that they associate with people who engage in these sorts of tactics.

    Please take another look at the Wall Street Journal article linked to in the article. Arends is saying some amazing things, is he not? How likely do you think it is that he is the only person in this field who knows that the Buy-and-Holders are only telling us half the story, the half that puts money in their pockets and takes it out of ours? I think it would be fair to say that the chances that that is the case are just about zero.

    So why don’t you hear all the time about the 30 years of research showing that Buy-and-Hold can never work? It’s career suicide to tell middle-class investors about this stuff. All the marketing campaigns fail if people find out the realities. People move up in this field through connections. It is the people pushing Buy-and-Hold with whom everyone wants to connect.

    There’s a wonderful story that Rob Arnott tells. He was speaking at a conference of investment researchers. He asked for a show of hands on how many of the 200 or so people in the audience still believed in the Efficient Market Hypothesis (Buy-and-Hold). A tiny number of hands went up. Then he asked a follow-up question. “How many of you will be using the Efficient Market Hypothesis in the research you will be doing when you get back to the office on Monday?” Nearly every hand in the room shot up.

    People in this field do not want their peers to think they believe in the conventional wisdom on investing because it would make them look uninformed. But they continue to pretend to believe in public because there’s still a lot of money to be made pushing these ideas. I believe that will change after the next crash.

    I’m not a cynical person by nature, Gary. If you had told me these things when I put up my post on SWRs on the morning of May 13, 2002, I would have been as skeptical as you are today. I would have said that the chances of this sort of thing being so are a million to one. So I cannot blame you for finding this hard to believe. All I can do is tell you that everything I say is documented in the Post Archives of the discussions we have been having at scores of boards and blogs for 10 years now. It’s quite a story.

    My preference is to focus on the positive side of the story. Buy-and-Hold is the past. Looking backward is depressing. I like to look forward to what I believe is the next big thing in investing analysis — Valuation-Informed Indexing. I can tell you that I have spoken to a number of financial planners who very much want to be making a transition to the new model. The trouble today is that so much money has been spent promoting Buy-and-Hold that it is hard to make the change without embarrassing people.

    We will figure out a way, however. This is too important for us not to do so.

    Thanks for stopping by, Gary. Please take care.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  33. Sorry, but I’ve never been one to think that there’s a vast conspiracy out to conceal the truth. I also think that if there had been real murder threats, you should have gone to the police immediately. This is a VERY serious allegation and is libelous if you name names and is not true. Can you provide a link to support your accusations of such unforgivable behavior?

  34. Sorry, but I’ve never been one to think that there’s a vast conspiracy out to conceal the truth.

    There’s not much evidence of coordinated action, Gary. People don’t get together and say “we’ll do such and such.” There’s not a conspiracy in that sense.

    And the Efficient Market concept was entirely legitimate at one time. Fama is a well-respected academic. His ideas are serious ideas. That part of it did not have its origin in marketing concerns.

    What appears to have happened is that people were very excited about Fama’s ideas in the early 1970s, and when A Random Walk Down Wall Street was published in 1974, the Buy-and-Holders really thought they had it figured out. Then Shiller came along with this research blowing things sky high in 1981. But Shiller’s findings are so far-reaching that people were not able to process the implications at the time. So people just sort of put it aside. They said “oh, that’s interesting” but didn’t incorporate it into their thinking on how stock investing works.

    I wouldn’t call any of that a conspiracy. There was a mistake on the Efficient Market concept. But it was an understandable mistake — the Efficient Market concept is entirely plausible. So there was certainly no conspiracy at that point.

    Then we had the huge bull market that lasted until 2000. No one even wanted to look at alternatives to Buy-and-Hold during those years. Everyone loved Buy-and-Hold. So people kept their mouths shut. There were academics at this time who had caught on to the idea that there were problems with Buy-and-Hold. But Warren Buffett has pointed out that the way things change in academia is that people who believe in an old idea die and are replaced by people who believe in a new idea. People who got famous promoting the old idea rarely change their minds and admit they were wrong. So things went on.

    It was with the 2008 crash that financial planners and their clients began to look around and start wondering if there were better approaches than Buy-and-Hold. So we have seen a lot more questioning of the conventional wisdom in the past three years.

    People very much worry about what will happen to their careers if they express their doubts publicly. I have seen this with my own eyes.

    And newspapers and magazines and web sites worry about losing readers if they tell them that Buy-and-Hold doesn’t work. People have a lot invested in this idea, both financially and emotionally. The people who get angry when I challenge Buy-and-Hold are not faking it. They really do get hurt when I say the things I say. So a lot of newspapers and magazines and web sites are afraid to take the issue on. Is that a conspiracy? I don’t think they are doing their jobs if they don’t take this up. But the reality is that you do lose customers if you push on this too hard. I know for a fact that some of my articles on Buy-and-Hold drive people away from my site. There is a price to be paid for taking this issue on.

    Whether all that adds up to “conspiracy” I will let others determine. I don’t see too much of a direct conspiracy, in which people plot together and all that sort of thing. But there is lots and lots of evidence of people looking the other way and not wanting to be the one to talk about the realities out loud because it will hurt their careers if they do. That’s better described as acting in one’s self interest than as conspiracy. It gets us to pretty much the same place, though.

    I mentioned above that I discovered the errors in the Old School safe withdrawal rate studies in 2002. Ten years later, the media is getting around to writing about it. And, when they write about it today, they avoid talking about why the studies get the numbers so wildly wrong. They don’t want to say that it was because the studies were rooted in Buy-and-Hold principles that there are going to be millions of middle-class people who are going to suffer failed retirements.

    Is that a conspiracy?

    It’s a very, very, very bad thing. I know that for sure. Once we went with this idea of rooting investment advice in research, we took on a responsibility to correct studies when we discovered errors in them. I am about the only person around saying that the Old School SWR studies should be corrected. I think that should tell us all something. I think Scott Burns nailed this one. He said we don’t tell people that millions of retirements are going to fail because “it is information that people don’t want to hear.” It’s not that it is not true information and it’s not that it is not important information. It’s that it is not popular information.

    The phrase I use to describe what is going on is “cognitive dissonance.” People very, very much do not want to know the realities, and so they block them out of their consciousness. It’s killing us. We need to face up to this stuff. But as of today people feel that their is more pain involved in looking at this stuff than there is in looking away. Cognitive dissonance is a real thing, People rationalize. They say “oh, it won’t end up that badly.” They wait for others to take action.

    Shiller warned that we were going to end up in an economic crisis. People laughed. Today, they don’t laugh. But they say “oh, the worst is over.” If you believe that Shiller’s research is valid, the worst is yet to come. If you believe Shiller’s research is valid, we have another big crash yet ahead of us. It’s painful for people to think about. So a lot of us elect not to do so.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  35. I also think that if there had been real murder threats, you should have gone to the police immediately.

    I’ve had the Purcellville police to my house on several occasions. And they have a file on this in a special Internet Crimes division of the Virginia state police. And I have spoken to someone in the FBI. I have also written my congressman (Rep. Frank Wolf) and spoken to an aide in his office on several occasions. And I have talked with about half a dozen lawyers about lawsuits I expect to bring.

    This is a VERY serious allegation and is libelous if you name names and is not true.

    It couldn’t be more serious. As I have mentioned above, millions of people are going to suffer failed retirements if we don’t get the Old School safe withdrawal rate studies corrected. Everyone agrees today that the studies get the numbers wrong. The financial planner who did the first study, Bill Bengen, acknowledges this. He hasn’t corrected his study, however. The feeling in this industry is that you don’t ever correct mistakes. If you suggest to people that they should correct mistakes because of the harm they will cause to millions of people, they look at you like you are crazy. The idea seems to be that that would hurt business and it just isn’t done. Getting the numbers wrong in retirement studies is as serious as all get-out but many of the experts in this field do not treat it like a serious thing.

    Can you provide a link to support your accusations of such unforgivable behavior?

    I linked above to the 101 comments of my fellow community members re the tactics used to block honest discussions at our boards. You can read there what people thought of the death threats and all that sort of thing.

    I have a link to the text of the e-mail that I sent to Rep. Wolf’s office:

    http://www.passionsaving.com/internet-harassment.html

    I hope that helps, Gary.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  36. I’m glad to hear that you’re not claiming some mass conspiracy. That would be nutty.

    However, I asked you to actually prove that the murder threats were made and you never actually answered my question. Instead, you talked about how serious the financial issues are and how you’ve talked to the police. I asked for a link to support your very serious allegation of murder threats, and you responded by telling me to go look at the 101 comments. I looked at some of these but, sorry, that’s a huge amount of material for me to sort through.

    So, I’ll repeat my question. Who actually made the murder threats? How can you show that they, in fact, occurred? Can you give me a link?

    Obviously, you must have the evidence handy if you gave it to the police and the FBI. Did they arrest someone? If not, why not?

    I’m sorry to bug you about this, but you’ve made some VERY serious allegations of felonies.

  37. I’m glad to hear that you’re not claiming some mass conspiracy. That would be nutty.

    The whole thing is nutty, Gary.

    You don’t consider it nutty that we know that the studies that financial planners use to help people plan their retirements get the numbers wildly wrong for ten years and we haven’t corrected those studies?

    You don’t consider it nutty that almost all of the academic researchers at a conference acknowledged that they no longer believe in the Efficient Market Hypothesis and yet they still use it to do their research?

    You don’t consider it nutty that we have available to us today research that can help us all earn far higher returns while taking on greatly reduced risk and yet few of us are exploring it on a daily basis?

    The entire story is as nutty as can be.

    Humans are nutty, you know? That’s the story here. And humans do great things. That’s also true and that’s also evidenced in this story. We’re nutty, great people.

    People don’t like to talk about that sort of thing in the investing area because we want to think our investments are on solid ground, that there is no nuttiness in the picture. But the reality is that, where the humans are, nuttiness follows. And investing is done by humans. So, yes, it has its very nutty elements.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  38. I’ve asked you THREE times to back up your terrible accusation. You simply won’t answer the question and instead produce long responses that are mostly fluff and do not address the question.

    It seems to me that a reasonable observer would conclude, Mr. Bennett, that you’ve falsely accused your opponents of threatening or attempting to kill your family. That goes well beyond acceptable behavior for a blogger.

    In any case, you’ve provided no reason for me to believe this or anything else you’ve said.

    I’m gone.

  39. Obviously, you must have the evidence handy if you gave it to the police and the FBI. Did they arrest someone? If not, why not?

    No one has been arrested, Gary.

    I’ll tell you what happened to the fellow who made the death threats. Motley Fool put him up for their Poster of the Year award in the year he made the death threats. I think they felt bad that I had objected to the death threats, so they wanted him to do something to make him feel better. He didn’t win but he was nominated.

    There was a fellow who wrote to the regulators long before Bernie Madoff was put in jail showing them how it was mathematically impossible that his fund was legitimate. They didn’t do anything. The Madoff fund was popular at the time. It was making lots of money for lots of people (or so they thought).

    When Madoff was arrested, there was a comment I saw on a discussion board that made an impression on me. There was one fellow who said: “Hey! The Madoff fund is not a fraud. I made millions investing in it!”

    People think that, if some made money, the enterprise is not a fraud. MOST fraudulent enterprises permit people to make money for a time. That’s how you pull people in. The question is whether the thing can be sustained for the long term. But people don’t always look too closely at that question so long as money is coming in.

    There will be a time when people will be very upset about the death threats and the wrong retirement numbers and all the rest. You know what I will be doing at that time, Gary? I will be taking the other side, I will be trying to calm people down.

    It would do people good to get a little upset today. Today we can do things to make things turn out a lot better than they otherwise might. It won’t do so much good to get angry after the next crash. It’s late in the game to get angry then. Too much anger then will cause the entire system to topple and that benefits no one.

    This is a human story, Gary. The police are human. The web site owners are human. The people who post to the blogs and the discussion boards are human. The experts are human. And so on and so on and so on.

    We’re going to have to figure it out as a society. You know where I am coming from. I see some very positive stuff and I see some negative stuff holding us back from getting to the positive stuff. I am going to keep trying to turn this into something good. I can’t do it on my own. So I am always looking for help. With help, I am confident we can do some truly amazing things. I’ll just keep trying and I can tell you that I get much better reactions today than I did prior to the crash. I believe that after the next crash, the reactions will be even better yet.

    I wouldn’t focus so much on the ugly side of this if I were you. It’s real. It happened. We all do need to come to terms with it. But there is more important stuff going on here too, positive, life-affirming stuff that very much needs our attention. So I hope you will direct some of your mental energies to that stuff too.

    Take care, Gary. Don;t let the bad guys get you down!

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  40. you’ve falsely accused your opponents of threatening or attempting to kill your family.

    I’m the one who had to tell my wife that there was a fellow on the internet threatening to kill her two babies, Gary. One was two and one was an infant at the time.

    If you think it’s a joke, I can tell you that the mother of those two babies very much did not think it was a joke. It’s not just that there was the one fellow threatening to kill them. There were many others cheering him on. No one can say with certainty that the sort of person who is crazy enough to make such a threat is not also crazy enough to carry it out.

    That’s sick stuff, Gary.

    That board doesn’t exist today. Not too many were willing to speak up. But all the good people left the board. It was the best board on the internet before the abusive posting. So we lost something important.

    Investing is emotional. That’s the takeaway. The Buy-and-Holders treat it like it is a 100 percent rational enterprise. Shiller showed that emotions have an effect on stock prices and need to be considered.

    We need to get to a point where we all understand this. There are two ways to deal with emotions. You can ignore them and thereby make them stronger. Or you can deal with them and thereby come to terms with them. During the Buy-and-Hold years, we got into the habit of ignoring our investing emotions. That’s why the things you make reference to took place. We made a big mistake.

    We can overcome our negative investing emotions only by getting them out in the open, by talking about them and coming to terms with them. Buy-and-Hold is an investing strategy fit for Mr. Spocks. We need an investing strategies that works for the humans because that is what we all are.

    We should talk about the death threats because they reveal how far off course we have let things get. Nothing like that ever should have happened. There should be a 100 percent consensus re that one. There isn’t today. But I do see signs that we are moving in the right direction.

    I think we will make it in the end. I certainly pray that we will.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  41. A final comment to other readers: Do you want to take financial advice from someone that acts like this?

    Whatever people decide, I will continue to post honestly re the numbers that my friends use to plan their retirements, Gary.

    I had lots of good times with the people at that board. They matter to me.

    I never should have been asked to post dishonestly. That never should have happened.

    That’s not what Buy-and-Hold was about in its early days. I hope to be able to bring it back to what it was in the beginning. It used to be about using research and data to LEARN what works. I have hopes that a number of us will be able to work to make it be about that once again.

    I wish you the best in all your future endeavors, regardless of what investing strategies you elect to pursue.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  42. No, Mr. Bennett, I don’t think it happened. Did you just fabricate it all to draw attention and sympathy? That’s really sad.

  43. Did you just fabricate it all to draw attention and sympathy? That’s really sad.

    We agree that it’s sad, Gary.

    My view is that the strength of our reluctance to talk about these things signals how important they are. If the underlying issues were not very important, we never would have taken this road.

    If that’s so, we are on the threshold of discovering something very powerful and very good. Taking investor emotion into account is 80 percent of what investing analysis is all about. And we are on the threshold of learning how to talk about investor emotion in serious ways and how to incorporate the effect of investor emotion into our research. Once we start doing that, we obtain very different answers to every question we examine, accurate and helpful and enriching (in all senses of the word) answers.

    Things get worse for so long as we continue to ignore our mistakes. But things start getting better in a big way fast once we acknowledge them. I’ve had a front row seat to all this drama for 10 years now. I can tell you that we are getting close. We are not yet at the place where we all deep in our hearts want to be. But we are getting close.

    Hang in there, my new friend.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  44. Bennett: I’m the one who had to tell my wife that there was a fellow on the internet threatening to kill her two babies… the mother of those two babies very much did not think it was a joke. It’s not just that there was the one fellow threatening to kill them. There were many others cheering him on… That board doesn’t exist today.

    Mr. Bennett,

    Whew, that is shocking. Even if the board does not exist any longer, by looking into your other writing, I’ve discovered that you claim to be keeping large binders of all of your posts and replies, as book research material. Surely, these death-threats and egging-on, would have been noteworthy enough for you to have produced an electronic or hard-copy duplicate, correct?

    So, please just cut and paste some of the representative threats, as well as instances of the the cheering on, so that good people like myself can rally to your aid and support you (even if oddly, you did not call in the police the very minute that you first received a credible threat.)

  45. so that good people like myself can rally to your aid and support you

    There have been thousands of opportunities for good people to rally to my aid and support (and to their own aid and support — it’s not only me who needs to know how to invest effectively!), CarpetKing. There obviously are factors here that cause people to behave in a manner in which they would not ordinarily behave.

    Say that you lived in a Southern town in the early 1960s and you were aware that black people were being put in jail for crimes they did not commit and being discriminated against in other ways. Would you speak up?

    You would want to. Something inside you would tell you that that was the right thing to do. But would you?

    Most people who found themselves in that situation did not speak up. Most people are not bad. So we face a puzzle. Why do good people not do the right thing in some circumstances?

    We are social animals. We take our cues as to how to behave from what we see others doing. We are ALL like that.

    I put up the post on the Old School safe withdrawal rate studies on the morning of May 13, 2002. Do you know when I learned about the errors? Years earlier. Why didn’t I say anything? I was afraid. I didn’t want people mad at me. I didn’t want people yelling at me. I didn’t want to become unpopular. And I didn’t even let my brain process these thoughts. I didn’t say to myself “you are not posting because you are afraid.” I rationalized. I told myself that it didn’t matter all that much, that perhaps the people who seemed so sure of themselves really had cause to be sure and I would look like a fool if I spoke up.

    Our problem here is that the mistake we made back in the early 1970s has caused so much damage that we cannot bear to face it. You’re talking about a death threat on a discussion board. Fine. That is of course a very bad thing. But I am saying that the continued promotion of Buy-and-Hold for 30 years after the research showed it can never work in the long term caused the economic crisis. That’s 100 times bigger, no? But what policeman do I go to to get that one addressed? I can show with numbers that that was the true cause. But for so long as people cannot bear to hear those words, people are not going to hear those words no matter how loudly or how frequently I say them.

    What I try to do is to reassure people. I speak the message as frequently as I can and in as many places as I can so that people get used to hearing it. That reduces fear. I try to focus on the positives. We’ve done some serious bad stuff. But we have laid the foundation for a lot of amazing good stuff and a lot of the people who were involved in the bad stuff were also involved in a big way in the good stuff. My hope is that over time setting things up in that way will make people more comfortable with the idea of speaking out. I try to make sense of what we have done. It sounds so horrible to ignore death threats. But if the humans did it and the humans are my friends, there must be a reason, right? I ponder these things and try to identify the reason and then reassure people that they really are not such monsters, just misguided and mixed-up humans.

    That’s how I think we get from the dark place where we are today to the very bright, loving. enriching place where we all want to be tomorrow.

    You want to dig into these wounds. You want all the ugliness out in the open.

    I half share your desire here. I do think we need to come to terms with all that has happened. I don’t think it is healthy for us to continue to cover this stuff up. The shame is killing us.

    But I think we need balance too. We are not all bad. There were people speaking up against the death threats. Go to that link with the 101 comments and you will see that. There weren’t enough of them to get the job done. But there were people doing the right thing. And I had big-name researchers in this field helping me out. And I had big-name bloggers giving me opportunities to run guest blogs at their sites. When I attended the Financial Bloggers Conference last year, everybody there knew who I was and everybody there had a kind word for me (“Oh, so YOU’RE Rob Bennett!” they would say). People are not perfect. But people are trying. Can we give them credit for that?

    I am asking people to do a very, very, very big thing. This means that 90 percent of the textbooks in this field need to be rewritten. It means that 90 percent of the calculators that have been produced need to be reworked. It means that lots of people who have won lots of praise and lots of money need to get up on a stage and speak the three hardest words to pronounce in the entire English language — “I” and “Was” and “Wrong.” Can we give these people a little bit of a break?

    They DO need to admit they were wrong. We cannot go forward as a society if they fail to do that. So I am not letting them off the hook. I am combining a demand for the honesty which we really do need to insist on with some mercy and kindness and charity and love. We all made these mistakes together. It wasn’t a few guys in black hats who we can turn into scapegoats. Buy-and-Hold would never have caught on if we all didn’t love those big. phony numbers we all saw on our portfolio statements for a few years. They told us what we wanted to hear and we applauded them for telling us pretty lies.

    If we don’t address this stuff, we all go down. The numbers tell us we are headed into the Second Great Depression.

    If we work together to take a sad song and make it better, we enter the greatest period of economic growth we have ever seen. The numbers show that too.

    So the idea here should not be to make people feel worse than they already feel. Yes, we need to start reporting the numbers we use to plan our retirements accurately. That MUST be done. No excuses, no exceptions. But we also need to appreciate the circumstances and the context in which these mistakes were made. They really were mistakes. They were made by people who were pioneers, people who made mistakes because they stuck their necks out a bit, people who were trying to take us to good places.

    This is a positive movement, CarpetKing. Yes, there were death threats. But this is not primarily about death threats. There were death threats because people were desperate and in pain. People had staked their lives on these ideas and then I presented them with irrefutable numbers showing that the ideas had failed. What would you do in those circumstances? I’m not saying the death threats were okay. I do not believe that. I am saying that we need to look at the other side of the story to be 100 percent honest about all this. The pain that people were feeling at the time of the death threats and even today is very, very, very real. It is wrong to leave that part of the matter out of the story.

    My aim is to bring that pain to an end. That’s the goal here. We don’t do that by telling more lies. But we don’t do that by focusing on the ugliest moment in the story and forgetting all the wonderful, encouraging, life-affirming stuff that we have also seen over the past 10 years. The story is 80 percent positive and 20 percent negative. I believe that if you spend a little effort letting in the 80 percent, your understanding of the 20 percent will become far more balanced and complete and edifying and satisfying and encouraging and forward-looking.

    I wish you all the best, CarpetKing. We’re all in this together, man.

    Rob
    Rob Bennett recently posted..The Buy-and-Hold MythMy Profile

  46. Oh, this is ridiculous! You make these tremendously long posts, repeating your accusations, but NEVER offer any evidence. People ask you questions and YOU DODGE THEM. I don’t believe a thing you say.

    Just another internet kook.

  47. I don’t believe a thing you say.

    You are not required to believe a thing I say, Gary.

    I mentioned up above that I have been wrong about many things in the past, that it could be that it is happening again and that, if it were, I would in all likelihood be the last to know.

    Please feel free to discount every word I have ever put forward.

    And please understand that if a day comes when I become convinced that I am indeed wrong, I will think back to your words and feel some gratitude that you were one of the ones who tried to get through my thick skull. And please understand that I really do wish you the best in all your future life endeavors.

    As of today, I believe in my heart, mind and soul that Buy-and-Hold is a myth. But I could be wrong and many smart and good people strongly believe that I am.

    Rob
    Rob Bennett recently posted..Wade Pfau: “I Just Became Aware of Your Past Research in September…. I Always Find Your Writing to Be Very Interesting and Intriguing”My Profile

  48. First: The notion that buy and hold is favored by stock brokers is pure nonsense. They make their money when you TRADE, not when you hold. They hate buy and hold. They want you to continuously trade and thus make commissions for them.

    Second: Your statement “I will continue to post honestly” raises eyebrows, considering that you can’t back up your statements and they seem highly dubious on their face. I am sorry to say that there is no evidence that you ever post honestly.

    Third: Your links led me to your website. Whoa! I suggest other readers simply go to there, read some of the stuff related to how you think you’ve been persecuted for many years and what you say about people that disagree with you, and decide for themselves whether they should take any advice from you.

  49. John,

    I appreciate your comments, but I would like to address a question to you. Do you feel, as owner of this site, that you have some responsibility for publishing Mr. Bennett’s claims and, with that, some implied endorsement?

    • As I said at the beginning of the post, the views are those of the author

      The only thing I’m endorsing is a civil debate on the issue. I’m seeing a lot of discussion of things that aren’t relevant.

      We are all only responsible for what we say. The last I checked, SOPA/PIPA is not the law of the land.

      Im not scared of ideas so my coscience is clear.

      • But you wouldn’t post just anything that anyone turned in to your site, would you, John?

        I certainly would be happy to post lots of things at my site that I did not agree with. For example, I am happy to post defenses of Buy-and-Hold even though I personally do not believe in this strategy. But there are things that do not meet my standards and I would not post them REGARDLESS of whether they were pro-Buy-and-Hold or anti-Buy-and-Hold.

        I believe that Gary is saying that my stuff is so bad that no one should be able to see it. One Buy-and-Holder told me once that my stuff is “dangerous.” Can you say whether you believe that the article meets a high enough standard that you think it is worth your readers’ time to look at it?

        The reason I am asking is that I am trying to get a debate started all across the internet re the merits or lack thereof of Buy-and-Hold. If all you can say is that your conscience is clear, that’s not saying much. You should say it that way if that is the truth. But I would like to think that I have presented arguments that carry more weight with you and with some others than those words would suggest.

        I had one fellow tell me once that he had never before even heard the argument that Buy-and-Hold is a Get Rich Quick scheme. That’s the problem, in my assessment. If people very rarely hear such arguments, they naturally cone to believe that there is not much to them on those rare occasions when they are put forward. I would like to get things to a point where it is a common event for people to point out the dangers of Buy-and-Hold at every investing site and blog on the internet.

        Can you say whether you learned anything by reading the article or the comments posted on it? I’d like to think that this has been a positive experience for a good number of people. To persuade more people to speak out on this issue, we are going to need to provide them with more warm fuzzies. I’d like to see things get to a point where those pointing out the dangers of Buy-and-Hold are every bit as accepted and applauded and celebrated as those making a positive case for it. I think that will be the turning point.

        Rob
        Rob Bennett recently posted..Wade Pfau: “I Just Became Aware of Your Past Research in September…. I Always Find Your Writing to Be Very Interesting and Intriguing”My Profile

  50. I’m with Gary, John. The guy has made libelous claims on YOUR blog, which you have active editorial control over.

    I merely asked him for a link or even a quote of one of the death threats, and instead got a 10,000 nonsensical blast of words in reply.

    Can you honestly allow this and keep a clear conscience?

  51. John,

    I absolutely agree with you that a debate should be civil. I don’t think that includes libelous claims that one cannot support.

    I’m, of course, not saying that Rob’s financial arguments are so bad they should be banned! I do think, however, that he simply lost all credibility for any topic when he starts to throw around talk of murder plots.

    You, after all, have an interesting and polite website. Don’t turn it into the X-Files.

  52. I don’t think that includes libelous claims that one cannot support.

    I opposed the death threats on the day they were made, Gary. I notified the site administrator at Motley Fool. When many people showed interest at Vanguard Diehards in the research we had done on safe withdrawal rates, the “leaders” at the board invited the Goon Squad that had made the death threats over to the Diehards board. I then notified the site administrator at Morningstar.

    Here is the site where the Goon Squad plans its attacks on all of the various boards and blogs that take us these questions:

    http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?board=HOCO

    They are over there laughing today at the disruption they caused on this thread. People who otherwise might be helping us all out are now afraid to post on it. We have of course seen this same basic pattern play out at board after board, at blog after blog.

    Wade Pfau is an academic researcher and a friend of mine. He has done research showing that I am right about the safe withdrawal rate issue and have been right for 10 years now. Wade wrote to the authors of the Trinity Study and asked them to correct their study. This infuriated the Goons, who then put up posts threatening to get Wade fired from his job. He knows that they have done this to others on earlier occasions.

    Should we all ignore this behavior? How can we trust any of the research we see in this field if the people doing the research fear what will be done to them if they do the research honestly?

    There is nothing whatsoever wrong with objecting to a death threat. We all should object to them. No one who objected to the death threats has anything to be ashamed about. It is those who posted the death threats and those who failed to take action re them who have something to be ashamed about. You have it upside-down, Gary.

    Bullies are the same all over the world, John. If you stand up to them, they run away because they are cowards. If you show weakness, they will come back again and again and again. It is finding the weaknesses in people and exploiting them that makes them feel that they possess some kind of sick power.

    None of this stuff belongs in investing discussions. The reason why we are seeing it here is that the alternative to getting caught up in this stuff is looking at the research and the data. And the research and the data have not supported Buy-and-Hold for 30 years now.

    Rob
    Rob Bennett recently posted..Wade Pfau: “I Just Became Aware of Your Past Research in September…. I Always Find Your Writing to Be Very Interesting and Intriguing”My Profile

  53. Bennett: “They are over there laughing today at the disruption they caused on this thread.”

    I did not see that, at all. I did see them tongue clucking over how badly YOU are faring, and mangling your own credibility.

    Others can judge for themselves using the link that you yourself just provided. In fact, one of the most recent comments sure struck a cord with me:

  54. Others can judge for themselves using the link that you yourself just provided.

    On this one we are in 100 percent agreement, Gary.

    One positive thing I can say about the Goons is that they don’t make any attempt to hide what they are about. Please put me down as opposed to that sort of behavior. It reflects badly not just on Buy-and-Holders but on all humans, in my assessment. I am proud to be able to say that there is no one posting on Planet Internet today who has spoken out against that sort of behavior as forcefully or as frequently as I have over the past 10 years. There is no one in a close second place.

    And, yes, I do wish you the best in all your future endeavors regardless of your involvement in this ugliness, Gary. Please take care.

    Joe — er, I mean — Rob!
    Rob Bennett recently posted..Wade Pfau: “I Just Became Aware of Your Past Research in September…. I Always Find Your Writing to Be Very Interesting and Intriguing”My Profile

  55. Bennett: ” On this one we are in 100 percent agreement, Gary.”

    I believe you were quoting me, not Gary.

    And no, I am not in 100% agreement with you on anything, based on what I have learned about you from this column.

    Sir, you do not seem to pay very careful attention to exactly who you are addressing, do you? Yet, I have always thought that proper attribution was a pretty dad gummed important thing to person holding themselves out a reporter.

    Right up there with truthfulness.

  56. Ok, back on topic, let’s examine just one of Mr. Bennett’s too-numerous-to count hyperbolic statements; “Buy-and-Hold doesn’t work.” As is his custom, Mr. Bennett provides no evidence to support his assertion. At the risk of annoying Mr. Bennett, I’ll show evidence which contradicts his assertion.

    A simple example of a buy & hold investment working very well is Vanguard’s Wellington Fund. Since it’s inception on 7/1/1929, the fund has provided an average annual return of 8.19%, using a fixed ratio of equities to fixed income of 65/35. Note the inception date, fairly long term I would argue.

    Or how about Bill Schultheis’ Coffeehouse Portfolio. Since 1991 that portfolio’s annual returns were 8.79% with a fixed ratio of equities to fixed income of 60/40. Does that meet the definition of works?

    And Scott Burns’ Couch Potato Portfolio, a 50/50 mix of Vanguard’s Index 500 Fund and Total Bond Market Fund. It provided and average annual return of 7.9%fort he past 20 years.

    For more information on how various buy & hold strategies have worked over long periods of time Google “Simba’s Spreadsheet for Backtesting.” You’ll find returns for several different passive buy & hold strategies, all using fixed equity/fixed income ratios.

    It would seem there are other successful alternatives to Rob Bennett’s chosen approach of timing the S&P 500 Index.
    Indeed, since Mr. Bennett determined that stocks (i.e., the S&P 500 Index) was “insanely overpriced” back in 1996, causing him to sell all his holdings, an investment back then in Vanguard’s Wellington Fund would have afforded him annual average returns of 9.10%, for the Couch Potato Portfolio 7.72% and for the Coffeehouse Portfolio 8.41%.

    And these were all actual investment vehicles, not theoretical constructs like his valuation-informed investing strategy which is derived from looking backwards at historical returns to determine what the optimal PE10 value to use to signal a switch between stocks and fixed income would have been and also what percentage of each to hold for a given PE10 level in order to produce the best results.

    • Thanks for pulling us back to substance, Carlyle. You are asking a question that I know is on the minds of many.

      There’s a reason why I say that Buy-and-Hold “can never work.”

      Your goal in setting your stock allocation should be to get your risk profile right. Buy-and-Hold was developed at a time when it was believed that the riskiness of stocks was a constant. If that were so, Buy-and-Hold would indeed be the ideal strategy. We agree re that much.

      Shiller showed (to my satisfaction and to the satisfaction of many others) that the riskiness of stocks is NOT a constant. It varies with changes in valuation levels. So, to keep your risk profile constant, you MUST change your stock allocation. Not often. But about once every 10 years or so on average.

      If Shiller is right, Buy-and-Hold cannot work. The opposite statement is true too. If Fama is right, Valuation-Informed Indexing cannot work. I don’t think that anyone disagrees that the object is to keep your risk profile constant. The entire dispute here is whether it is the Fama model that is right or the Shiller model that is right. That’s what we all should be talking about. My view is that we need to launch a national debate on this question.

      Your listings of returns for certain time-periods are not going to impress those who believe in the Shiller model. Why? Because the focus of the Shiller model is the long term and any listing of returns is only for a limited time-period. What Valuation-Informed Indexers prefer to do is to look at the ENTIRE 140 years of returns and see which strategy works better in each 30-year time-period. VII has beat BH in 102 of the 110 rolling 30-year time-periods now in the record. That’s not a small edge.

      Below is a link to research by Wade Pfau showing that: “[Long-Term] Market-Timing Strategies Provide Comparable Returns As a 100 Percent Stocks Buy-and-Hold Strategy but with Substantially Less Risk. Meanwhile, [Long-Term] Market Timing Provides Comparable Risks and the Same Average Asset Allocation as a 50/50 Fixed Allocation Strategy, but With Much Higher Returns.”

      http://mpra.ub.uni-muenchen.de/29448/1/MPRA_paper_29448.pdf

      You cannot beat getting higher returns at reduced risk. If the Shiller model is valid, staying at the same stock allocation at all times MUST lower your risk-adjusted return over the long run. It is a logical impossibility that we could ever see long-term results showing otherwise, IF the Shiller model is valid.

      I also ask that my fellow bloggers note Wade’s kind acknowledgment that “”I Am Also Extremely Grateful to Rob Bennett for Motivating This Topic and Contributing His Experience and Encouragement.” I did not go to investing school. I have never managed a big mutual fund. But I have changed the history of investing in a highly significant way by inspiring this breakthrough research. I have had extensive e-mail communication with Wade over the past two years. He learned about me by reading my posts at the Vanguard Diehards board (a board at which I am now banned from posting) and we have in the past two years become friends and colleagues. We ALL can do this sort of thing if we stop just repeating what the “experts” in this field say without thinking it through and asking hard questions. It’s part of our job to do that, in my assessment. We aren’t serving our readers unless we do that, in my assessment.

      I am grateful to you for asking an important and helpful question, Carlyle.

      Rob
      Rob Bennett recently posted..“We ‘Know’ All Sorts of Things About Investing Today That We Do Not Want to Acknowledge That We “Know. My Aim Is to Harvest This Unappreciated Knowledge.”My Profile

  57. TO ROB BENNETT: “And, yes, I do wish you the best in all your future endeavors regardless of your involvement in this ugliness, Gary. ”

    MY involvement? All I did was ask you to support your statements that someone tried to murder your family! Now you’re adding personal attacks on me?

    NOTE TO JOHN: I’ve been a reader of your site for quite a while. I won’t be in the future. Allowing Mr. Bennett’s type of viciousness here means it is no long a site for me. With all the goodwill I can muster, my final word will be that you really ought to do a better job checking on the people you invite to write columns. It only took a minute with Google for me to discover more than I wanted to know about Mr. Bennett.

    • Gary, I am sorry to lose you as a reader, but please stand by your word and make that your last comment here.

      • What an incredibly callous and outrageous position to take. He very politely points out the error in your current ways of vetting contributors, and you tell him to get lost.

        Good luck with how that works out in terms of keeping readers and advertisers.

        (And for Mr. Bennett’s files: No, that’s not a death threat, nor anything other than a simple observation.)

        • My concern is that community members who otherwise might have put forward helpful and constructive and positive contributions have been scared away from this thread. I’ve seen it happen at hundreds of places and it makes me sad every time I see it. It’s counter to the spirit in which just about all personal finance blogs were created.

          This sort of behavior hurts Buy-and-Holders as much as it does Valuation-Informed Indexers. We are all in this together. We all want the same thing — to learn how to invest our retirement money as effectively as possible.

          The encouraging news is that this thread couldn’t have existed in any form a few years back. I know because I have been trying to get such threads going for a long time. Things are moving in the right direction. We all should feel good about that.

          I hope that some of us at least have some new ideas to consider. Lots of great people contributed here and I am grateful for what I learned from each and every one of my new friends. I hope that I will be able to contribute here again in future days.

          Thanks for your courage in hosting a discussion of this topic, John.

          Rob
          Rob Bennett recently posted..Wade Pfau: “I Was Trying to Pay Tribute to Your Accomplishments in What I Knew Would Be a Hostile Environment”My Profile

  58. Rob, I think you might have more impact if you relate the PE10 to the tenets of value investing. In particular, Ben Graham – a god of the financial world, and inspiration to Warren Buffett – pronounced his favor of valuing companies based on 10 years of historic earnings.

    The rationale is that, when applied to otherwise sound businesses, a ten-year earnings look allows investors to base investment decision-making on a very conservative model for future earnings.

    In the end, it’s all about the level to which you want to take your research. Buy and hold works for people with zero real interest in investing. You can “buy and hold” without spending more than 30 seconds a year on your portfolio.

    You can also use the PE10 valuation informed model and likely get a much higher return on your investment capital. I don’t know why this is being debated, really. Moving assets between equity and fixed-income to achieve higher returns is very much a real strategy. As equities tend to become removed from their underlying performance (driving down earnings yields) it makes sense to move to fixed-income assets until the spreads between earnings yields and bond yields align more closely with financial reality.

    That said, it’s a debate you won’t win. Suffice it to say that Ben Graham’s Security Analysis has been in print for…what? 80 years or something? Yet, even though his work is widely available and the source of the strategy used by the world’s most successful investors in the public markets, it will never be adopted by the mainstream.

    I’ll leave this thread with one of my favorite quotes from Warren Buffett on the topic of value investing:

    “It is extraordinary to me that the idea of buying dollar bills for 40 cents takes immediately with people or it doesn’t take at all. It’s like an inoculation. If it doesn’t grab a person right away, I find that you can talk to him for years and show him records, and it doesn’t make any difference. They just don’t seem able to grasp the concept, simple as it is. There seems to be some perverse human condition that likes to make simple things difficult.” Warren Buffett
    JT recently posted..An Inside Look at Private EquityMy Profile

    • I don’t know why this is being debated, really….

      That said, it’s a debate you won’t win.

      Thanks for your helpful and well-informed comments, JT.

      I think I am going to win. I think I MUST win or our entire free-market economic system goes down.

      In the old days, the retirements of middle-class people were covered by defined benefit plans. We have taken those away and given middle-class people responsibility for providing for their own retirements.

      Once we did that, we took on a responsibility as a society to provide a means for people to gain access to ACCURATE information re how to invest for the long term. We are going to have to provide accurate information, whether the industry likes the idea or not.

      We WILL win. Because, otherwise, things are going to get so bad that even The Stock-Selling Industry is going to want to change the way things are done today. We ALL benefit from our free-market economic system, the super-rich and the middle-class both. A wipeout of the middle-class brings down the system. It is ultimately in everyone’s best interests to get accurate information out to people.

      People want to know how to invest effectively. I have talked to tens of thousands of middle-class investors over the past 10 years. A good number have told me that they believe that everything I say about investing makes perfect sense but they are still not going to adopt my ideas. Why? Because they don’t feel comfortable going against the “experts” who say just the opposite of what I say.

      The popularity of Buy-and-Hold is from one perspective a very positive sign. Buy-and-Hold is MARKETED as being a research-based strategy. Millions of middle-class people like the idea of rooting their strategies in research and moving away from all the Get Rich Quick gibberish that has long dominated the “advice” given in this field.

      My view is that we are on the 99-year line. I believe that, if Shiller has published his research in 1971 rather than 1981, the title of the book would have been “A Valuation-Informed Walk Down Wall Street” and we all would be Valuation-Informed Indexers today.

      It was an historical quirk (that all the research needed to build an effective research-supported approach was not available when Buy-and-Hold was being developed) that got us into this mess. If Shiller is right, we will be seeing another crash sometime over the next few years. I think that is going to soften a lot of people’s hearts.

      I think we are going to see a greater willingness to permit honest posting on all sorts of investment-related topics in coming days. And I think that, when we do, the Buy-and-Holders are going to get a huge amount of credit (which they deserve) for getting us on the right track and we will see the changes that are needed to transform Buy-and-Hold into a strategy that really can work in the long term.

      Lots of people think things can never change. I can agree that there are forces here that very strongly oppose change. But I think the human misery is just growing too great for us to ignore these issues too much longer. I think we are going through a painful transition period and that waiting for us on the other side is the greatest period of economic growth that we have ever seen in our history.

      Exciting times!

      Rob
      Rob Bennett recently posted..Wade Pfau: Bogle in Many Cases Has Said Things “Not All That Different From What You Said”My Profile

  59. “VII has beat BH in 102 of the 110 rolling 30-year time-periods now in the record.”

    In one particular backtest using one particular set of PE10 switch points. And holding one particular set percentages of the S&P 500 Index to be held for each PE10 level. All found by looking backwards at the data. What if the investor back in time had chosen different switch points and held different percentages of the S&P 500 for each PE10 level? And how does VII perform in backtests against the Coffeehouse Portfolio or other more diversified portfolios? Where are those backtests?

    Such backtests would provide valuable information useful in determining the effectiveness of VII as investment strategy compared to buy-and-hold alternatives. Reading verbose posts detailing your passionately held beliefs of value? Not so much. Also, if you get to look backwards at the data to pick which PE10 level and what S&P 500 Index amount was optimal, it seems only fair that buy-and-hold investors should get to cherry pick past data to see which funds provided optimal returns.

    Cheers!

    • In one particular backtest using one particular set of PE10 switch points.

      Wade Pfau’s research is NOT the only research showing that Valuation-Informed Indexing always beats Buy-and-Hold on a risk-adjusted basis, Carlyle. John Walter Russell researched this question for eight years from scores of different angles. All of his research supports what Wadehas found and what Shiller has found and what Rob Arnott has found and what Andrew Smithers has found and what Ed Easterling has found and what many others doing similar work have found.

      What is more important than all that, though, is that there has never been a single piece of research produced supporting Buy-and-Hold.

      You have a hard time accepting that. I get it. But it is so all the same. There has never been a single piece of research produced that supports Buy-and-Hold. If such a piece of research existed, some Buy-and-Holder would have provided me the URL a long, long time ago. I have asked. The response I get is “you’re a troll!” That’s not a good response. Not when we are talking about a strategy that is purported to be “scientific.” Not when we are talking about a strategy that people use to plan their retirements.

      People THOUGHT there were studies supporting Buy-and-Hold. That much is so. What happened is that, in the old days, people equated the term “market timing” with “short-term market timing.” No one even knew that such a thing as long-term market timing existed until Shiller published his research. Buy-and-Hold was developed PRIOR to the publication of Shiller’s research. And there WAS research showing that short-term market timing doesn’t work. So the people who developed Buy-and-Hold quite naturally concluded that “timing doesn’t work.” All the rest of the strategy follows from that. If the things we believed in the early 1970s were so, Buy-and-Hold would be the ideal strategy.

      The foundation for the entire Buy-and-Hold strategy was a mistake. That’s the reality. It may be that that upsets you. But there is nothing that I can do about it. That is the objective historical reality we are dealing with here.

      So.

      We have one strategy (Valuation-Informed Indexing) that is supported by 30 years of research based on 140 years of data. We have another that is supported by precisely nothing.

      You are saying that 30 years of research and 140 years of data isn’t enough. I have zero problem with the idea of people continuing to look for something better than Valuation-Informed Indexing. I wish them the best of luck. They may end up helping us all out.

      But we need to know what to do with our money TODAY.

      Buy-and-Hold and Valuation-Informed Indexing are the only two research-supported strategies available to us today. And one of them has zero research supporting it! What do you think people should do given these circumstances?

      I say that we all should be TALKING IT OVER. We all want the same thing. We all want to become effective investors. By TALKING IT OVER, we all get what we want. We LEARN.

      My feeble brain is not able even to imagine any possible downside.

      Rob
      Rob Bennett recently posted..Academic Researcher Wade Pfau: “As You Say in Your Podcast, Valuation-Informed Indexing Should Beat Buy-and-Hold About 90 Percent of the Time, and I Am Getting Results That Support This”My Profile

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