Some folks seemed to misread what I had written. Others misunderstood the approach.
So let’s try this again.
Before we wade back into it, let me explain what that column was not: It was not a claim that stocks were cheap; nor was it a suggestion that you must buy stocks now! Indeed, I tried to emphasize that this was not about the next few weeks or even months, but about a timeline measured in decades.
The goal was to engage in a sober discussion as to what readers should be considering if they happened to have missed a once-in-a-generation rally. Toward that end, let’s look at some of the pushback:
●The only way you did not miss the 150 percent move is if you bought at the bottom and sold at the high and invested 100 percent in the stock market.
This is incorrect. To see why, you need to understand three things:
First, you must recognize that you are not a hedge fund, and your goal as an individual investor is not to outperform the benchmark (not that most hedge funds do, but that’s another column entirely). Rather, your goal is to meet some future need, be it buying a house, paying for college or retirement.
Second, if you were in an asset-allocation model, you would have already owned equities and bonds. And third, you would have been incrementally selling equities into the market peak and rotating into fixed-income investments. And you would have been buying equities into the 2009 lows and selling bonds then. That is what rebalancing does.
●The Fed is printing money, and the Dow is heading to 5000!
Thank you for your forecast!
Truth time: How long have you been peddling that Dow 5000 prediction? How many times have you made investments based on that (or other) forecasts? What is your track record? How on earth do you think you know where the market is going to land?
Sorry to have to tell you this, but you just made my point. You missed the Big Kahuna rally by investing based on your own forecasts. This is a terrible approach.
●Count on the fact that you are an outsider and not privy to the insiders’ knowledge or strategy.
Who are the insiders? Billionaire hedge fund manager John Paulson? His funds have gotten mangled over the past few years. Even what is arguably the largest, most successful hedge fund, Ray Dalio’s Bridgewater, is down this year despite a strong market rally.
The so-called insiders have done no better, and in many cases far worse, than you.