Ray Brunelle

Market Dump

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[QUOTE=Ray Brunelle;954002][QUOTE=MikeGlastonbury;954001]Actually, missing the ten worst days - IOW timing the market - can be a better investment than being IN during the ten best days:


You're right IF you can you time perfectly Mike. Thats a big IiF. That's not something I want to hang my future on. More importantly, it also assumes that you must make many decisions to achieve that result, when to get out, and then when to get back in, if you hope to achieve such a lofty return. The long investor only has to make one decision - when to get in. What about missing the best 20 days or 30 days? At some point data supporting this thesis begins to lose credibility. It doesn't take much more of a miss to lose out against a long term investor.

But for the sake of argument let's concede the underlying premise of this article -- Read it again, just a bit more carefully. It actually supports what I am suggesting. READ: "extremely difficult, if not impossible:

[FONT=InvescoInterstate]"As illustrated below, some of the best and worst days in the history of the stock market have occurred fairly close together during the 88-year period, making it extremely difficult — if not impossible [/FONT][FONT=InvescoInterstate]to avoid the worst while benefiting from the best. Not surprisingly, many of the worst-performance days happened during bear markets, but so did many of the best-performance days — an illustration of the extreme volatility investors endure during market corrections."
If further provides a great example of this difficulty of avoiding the worst and benefiting from the best. [/FONT]

[FONT=InvescoInterstate]"Let’s focus on just one three-day period in 1929 as an example. Oct. 28 to Oct. 30 brought investorstwo of the 10 worst days (–12.94% and –10.16%) and one of the 10 best days (12.53%) of our88-year period. October 2008 saw similar highs and lows. It’s highly unlikely that investors could have predicted that kind of whiplash volatility and taken action in time to protect their portfolios."
Finally your article recommends exactly what I would do:
" what should you do? Attempt to minimize risk and not take an overly aggressive approach toward returns. STAY INVESTED — remember that cash returned only $19.33 on a dollar investmentover 88 years — but make intentional choices to help defend your portfolio against large losses."
Defending the portfolio while staying invested means building cash when things get frothy, and add to positions when things go on sale. That's buy and add, not buy and hold. It helps buttress your overall return by having some cash available at all times to take advantage of downdrafts.

Fianlly, I found it interesting that the author chose to close their article by focusing on the years 1928-33, the worst depression in the history of the market. Cherry picking over a short period like that might help fit the narrative, but it would have been best to conduct the research over many overlapping 20 years periods to give a less prejudiced result. [/FONT][/QUOTE]