The Only Problem With Valuation-Informed Indexing Is That It Makes Buy-And-Hold Look Bad

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The Only Problem With Valuation-Informed Indexing Is That It Makes Buy-And-Hold Look Bad

 Valuation-Informed Indexers believe that valuations affect long-term returns, as Robert Shiller showed in peer-reviewed research published in 1981. Thus, we believe that stock investing risk is not static but variable. Not only do we believe that long-term timing works (the entire historical record of stock price changes supports this belief), we also believe that long-term timing is required for investors seeking to keep their risk profiles roughly stable over time. We believe that stock prices are self-regulating; so long as most investors understand that stocks offer a stronger value proposition when prices are low than they do when they are high, investors will sell shares when prices get too high and thereby cause prices to return to more reasonable levels. So we make an effort to inform investors of the danger of investing heavily in stocks at times of high prices.