"But I don't think that trying to deny that a particular move was a good one - when it very clearly was, by luck or by skill - is the best way to defend this approach."
Most likely Klondike5 is a f*cking lier. Blowhards like him always are. They tell you how smart they are and what great moves they made AFTER the fact. I'd just as soon have a root canal with nothing other than yukon jack for the pain, than have a conversion with someone like him.
Clearly, the best way to make a lot of money is to time the market perfectly. It will beat every other investment approach out there. The problem is it always requires two correct guesses when to sell and when to buy - over and over for a lifetime. Nobody can do this since the market is not predictable.
What you KNOW is when the market has been going up, and when it has gone down. You can also know if the market is, in general, expensive or relatively cheap.
What I do is sell a little when the market is rising or when it is expensive, and I buy when it has dropped or is cheap. So for instance, I was taking small amounts of money out of equities in 2006, and moving them to bonds (and other investments). In 2007 I was static. In late 2008 I started selling bonds, and moving back to equities. By 2009 100% of all investing was going into equities. I was also buying individual stocks left and right. By 2010 I was back to where I wanted to be, and started investing in bonds again (and selling many of the individual stocks I bought).
Right now? Bonds are expensive, stocks are fairly valued (although some pockets are cheap), but I've been selling stocks and moving that to cash. Bonds are sitting right where they are. They are a good diversifier.
I sound like Klondike, but these are not huge moves. I'm not selling all my equities. I'm talking 1-5% of my portfolio. It's a form of rebalancing, but it's a somewhat tactical approach as opposed to a mechanical one most would advocate.
I don't recommend anyone following what I do. You should do what you think is right for you. Everyone has a different temperament, different goals, and different amounts of knowledge and IQ (or lack of). I'm okay if the market drops 50%. My goal is to have 2.5 - 3.0 million. Then I'll feel set for retirement. I'm concerned about the total return I achieve over my lifetime of investing. Not over some short period of time. It took a little more than a year to recover my "loses" from 2008, not counting my new investments coming from my salary, but counting the moves I made with money (bonds to stocks). If we have another 50% drop, I expect a similar recovery, though it might take a little more time.
BTW, Klondike's assertion that people did not recover their losses from 1929 until the 50's is hogwash. in the 30 stocks paid healthy dividends. Much more than today. So you just can look at the price graph which does NOT include dividends. Smart investors made money in the 30's, and a lot of money in the 40's.