Beyond Buy-and-Hold #79
By Rob Bennett
I thought you should know.
It does. It breaks my heart. I care about you guys. So talk to me!
I get the silent treatment all the time. I write three weekly columns and two monthly columns and lots of Guest Blog Entries. I can go weeks without seeing a single comment on my stuff. Here at the Out of Your Rut site, I got a good number of comments in my early days. Then people figured out what I am about and stopped commenting.
I sometimes feel that I am suffering from reverse Sally Field syndrome. I may someday blurt out: “You hate me! You really hate me!”
Except you don’t. Not really. I know from times when I have posted on non-investing topics that you love me as long as I am not doing the special thing I do in investing posts that causes you not to comment. You’ve even gone so far as to tell me what the special thing is and to ask me kindly to knock it off.
You told me: “Stop saying that Buy-and-Hold doesn’t work, Rob. Say what does work. Tell us about what you like. But don’t put the Buy-and-Holders down.” That’s a sensitive spot with people. I get that loud and clear.
I don’t know precisely why. We all have our roles to play in this drama and I think it would be fair to say that my role is to get the word out. So my inclination is always to say more. I have a hard time letting in the idea that at times it might be better to say less. It’s clear to me, though, that many others feel otherwise. Many feel that I would have a whole big bunch more impact if I said less. They would even be open to commenting if I did so.
I’m not here to announce that I am making the switch. My purpose is to talk things over. My aim is to figure this out.
Why do people want me to say less? Why are people so sensitive to criticisms of Buy-and-Hold? Again, I don’t know precisely. But I need to put some effort into understanding where people are coming from.
A part of it is fear. When I first posted about the errors in the Old School safe withdrawal rate studies at the Motley Fool board, lots of people participated in the discussions in a positive way. People didn’t see anything wrong with doing so in the early days. Then the attacks posts came and the room got real quiet real fast. So I know that’s part of it. People don’t want to be attacked.
That can’t be the entire deal, however. There’s more of us than there are of them. We have rules at every board and blog for dealing with posters who put up attack posts. The majority in all of the communities has elected not to insist that those rules be enforced, thereby empowering the abusive ones. So there is something else going on here.
Another part of the explanation is a lack of knowledge. I’ve had a number of people tell me that they believe that everything I say about investing makes sense but that they feel they need to go with what the “experts” say all the same. A lot of us don’t think we know enough to feel comfortable challenging the conventional wisdom. I am confident that that is another factor.
Yet another factor is shame. We all went along with Buy-and-Hold for many years. No one held a gun to our heads. I believe that we suspected on some level of consciousness that it was all a big bunch of hooey. Now we worry that we messed up our own retirement plans. We don’t want to face that painful truth.
I think there’s even more than all this at play here.
Valuation-Informed Indexing is a huge advance over Buy-and-Hold. It changes everything. I think we are scared to go there. It all sounds too good to be true. We don’t fully understand this new world (how could we when we have never permitted ourselves to discuss it?). Humans have a natural fear of the unfamiliar. It might be wonderful, but it might be terrible. Who knows? Better safe than sorry. Better not to go there.
This is my take on the reasons why you don’t comment on the articles I post here. I wish you would! It’s by talking things over that we will become familiar with the strange new world and learn that it really is very, very wonderful and not at all terrible. Come in! The water is fine! Really!
Could I stop saying that Buy-and-Hold doesn’t work?
No. It would not be honest for me to say that. Buy-and-Hold is promoted as a research-supported, data-based strategy. That has always been the source of its power to persuade us. Once we learned that the research and the data no longer support it, the strategy died and had to be replaced. It was a terrible mistake for us to put off the burial for so long. It’s that mistake that put us in this mess in the first place. So I obviously don’t want to repeat the mistake.
I believe that a great deal of the hesitation to move forward comes from good motives. People feel for the Buy-and-Holders. People don’t want to blame their friends and their neighbors and their co-workers for causing the economic crisis.
That’s nice. But we have to come to see that by putting this off we are making things worse for the Buy-and-Holders. They didn’t start out with the idea of sinking the U.S. economy. Had we pressed them to fix their mistake when we first learned of it (1981!), it would have been a a case of no harm/no foul. We did the Buy-and-Holders no favor in letting them cause an economic crisis.
And we can make them all feel better about themselves by getting things out in the open. The full truth is that the Buy-and-Holders contributed many powerful insights. There would be no Valuation-Informed Indexing had there not first been Buy-and-Hold. We do our Buy-and-Hold friends right not by patronizing them but by holding them up to standards to which they would hold themselves if they were thinking clearly.
Comment! Talk! Discuss!
Rob Bennett has recorded podcasts on risk, valuations, investment myths and other topics related to understanding stocks. His bio is here.