8% annual stock market returns... when will they return?

[jyl]

Originally posted by Nathans_Dad
You guys are all falling into the market timing trap. You assume that you would have gotten out at the top of the market and waited to buy until the bottom. Very rarely do people get lucky enough to do that. In fact, human nature is to hold on to your stocks or funds when the market is doing well and then get nervous and sell at the bottom.

So, the more realistic scenario would be you bought your stocks or funds 3-4 months ago when the market was rising and you felt safe, then got nervous when the market tumbled and sold, then missed the rally yesterday and bought in because you thought this was the turnaround and now you are fretting because the market is down a bit today.

Market timing works great in retrospect. Wish I could invest in retrospect.

You can eliminate human nature from it. Studies over 20-40 years of data show that some fairly simple quant models can significantly outperform a buy-and-hold-the-market approach. Most of these are value strategies - owning the lower quintiles of P/E and P/B for instance.

Or you can be an effective active investor. Many different approaches. Some people can indeed time the market well, just as some people can effectively pick stocks.

Agreed that if you can do neither, then buy-and-hold is certainly better than being an ineffective active investor or not being an investor at all.