"The historical evidence is clear that the winning strategy in both stocks and bonds is to ignore all forecasts and stick to a well-developed plan." -- Larry Swedroe


A possible re-write of that:

"The historical evidence is clear that the winning strategy in both stocks and bonds is to ignore all forecasts and stick to a well-developed plan based on the fact that the likely forward real returns depend more than anything else on starting valuation levels." It's not a precise science, but it's better to be approximately right than precisely wrong. If something you own is very very expensive, you probably won't have a decent return if you own it for a long time.

As an extreme example, but (for many people) a shocking one, if you buy bonds with a negative real return and hold them till maturity, you will end up losing wealth. And, only slightly less obvious, if your equity portfolio has a low cyclically adjusted earnings yield, you shouldn't expect a forward return very much more than that. (Plus maybe 2 %/year for trend GGP growth, to be generous, but less than that if future valuation levels are lower than when you start).

If you're an active trader and do a meaningful amount of "buy low sell higher" (as with most of us here), then that rule doesn't apply. But on average, axiomatically, investors as a group won't manage that, so you have to be smarter than the average bear. It's entirely reasonable to try to beat the market, but it's also entirely reasonable to assume for planning purposes that you won't succeed.

Jim