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Analysis of Valuation-Informed Indexing?
My reaction to this is that your observation @D.W. is spot on correct: It sounds like long-term market timing: trying to do a better job than   the rest of the market at predicting, based upon a simple formula,   whether the market is over-priced or under-priced. I read the post by the founder of Valuation Informed Indexing, Rob Bennet. Glance at  the comments section. Rob clearly states that he doesn't even use his own strategy, and has not owned, nor traded, any stocks since 1996! As another commenter summarizes it, addressing Rob: This is 2011. You’ve been 100% out of stocks — including indexes —   since 1996? That’s 15 years of taking whatever the bond market, CDs or   TIPS will yield (often and currently less than 2%)... I’m curious how   you defend not following your own program even as you recommend it for   others? Rob basically says that stocks haven't shown the right signals for buying since 1996, so he's stuck with bonds, CD's and fixed-income instead. This is a VERY long-term horizon point of view (a bit of sarcasm edges in from me). Answering your more general question, what do I think of this particular Price/ Earnings based ratio as a way to signal asset allocation change i.e. Valuation Informed Investing? I don't like it much.