Do the Buy-and-Holders believe in Buy-and-Hold?
Yes and no.
I believe that they follow the strategy themselves. This would be a pure scam if it were a situation where the Buy-and-Holders were discouraging others from engaging in market timing but happily protecting their own retirement accounts all the while. I don’t believe that that’s the case.
My sense is that the Buy-and-Holders occasionally make exceptions to the dogmas for themselves without telling others that they are doing so but as a general rule refrain from market timing themselves. I do not possess perfect confidence on this point but I possess a high level of confidence.
So they believe in Buy-and-Hold to a point.
Confidence In Buy-and-Hold
However, it is a rare Buy-and-Holder who possesses enough confidence in Buy-and-Hold to enjoy the thought of engaging in civil and reasoned debate about the strategy. I am not saying that most Buy-and-Holders favor the abusive tactics that have been employed to block challenges to their strategy at many sites. That is not the case.
Most Buy-and-Holders would never engage in abusive posting tactics; a good number have spoken up in opposition to the abusive posting tactics. Most would tolerate honest posting re the peer-reviewed research if it were permitted at a site at which they regularly participated.
Many would even participate in such discussions from time to time. But most don’t feel much enthusiasm for the idea of such discussions being held. Most are not able to condone the behavior of the abusive posters but are not entirely unsympathetic to their goal of shutting down discussions of Shiller’s research findings.
So they don’t believe!
I believe in Valuation-Informed Indexing. I am proud of it. I think it is the future of investment analysis. I want the entire world to discover its wonders. So I seek out debates about its merits. I do not fear that some Buy-and-Holder is going to make a point that I have not considered and undermine my confidence in my favored stock investing strategy.
I use this strategy myself and I recommend it to friends. If it has weaknesses, I want to learn what they are. A Buy-and-Holder who points out a flaw in Valuation-Informed Indexing instantly gets added to my Christmas card list.
I believe that Valuation-Informed Indexing works. But my goal is not to reassure myself that I am always right, it is to learn what I need to learn to invest effectively. If a debate leads me to have more confidence in Valuation-Informed Indexing because even its confirmed foes cannot identify any downsides, I view that as a good thing because it increases my confidence in something that works. If a debate leads me to having some doubts, that’s also good, because doubts prompt me to learn more about the true realities of stock investing. I win either way.
The Bottom-Line Reality
The Buy-and-Holders really, really, really want to believe in their strategy. But they really, really, really do not. That’s the bottom-line reality re these matters. The Buy-and-Holders did a lot of good things. But the single greatest thing that they ever did was to argue that investors should look to the peer-reviewed research for guidance on how to invest. By doing that, they put a check on their emotions.
They might fall for some foolish Get Rich Quick idea. Those sorts of ideas have been harming stock investors for as long as there have been stock markets. But for so long as there are people doing peer-reviewed research, we are going to discover the flaws in the strategies that become popular. When we make mistakes, as we humans inevitably will, we have a system in place to get them corrected in time.
If only the Buy-and-Holders would listen to their own advice!
The peer-reviewed research concept is a powerful concept. It is our protection against that horrible, addictive Get Rich Quick impulse that resides within all of us and that has been doing damage to the hopes of stock investors since the beginning of time. In 1981, we as a nation of people clicked into place the most important piece to the stock investing puzzle. We now know the critical thing re which for many, many years we remained ignorant. Market timing is absolutely essential! It is 70 percent of what is needed to achieve long-term investing success.
Our Get Rich Quick impulse is resilient. It does not want to give up the fight. It hates, hates, hates the things we learn from peer-reviewed research. We love peer-reviewed research but at this moment in time we love Get Rich Quick stock investing strategies a bit more. We are conflicted.
The new research makes it very hard to maintain confidence in a Get Rich Quick approach. I see that as a good thing. But as a nation of people we are having a hard time moving beyond our Get Rich Quick addiction. You can’t have both open discussion of the research and continued confidence in a Get Rich Quick strategy.
We are at a turning point in our history.
Following the next Buy-and-Hold Crisis, we will be conflicted and poor. Then we will have an opportunity to use the crisis to do some good for ourselves, to give ourselves permission to consider the 42 years of peer-reviewed research that holds the answers.
Rob’s bio is here.
