Market Timing
Alan Greenspan
“If the facts change, I will change.” - Alan Greenspan
Myths and Facts
“It’s Not Always About What It’s About!”
Myth #1: You Can’t Time the Market Who started this rumor? Mutual Funds and Money Managers. Why would they do this? So you will pay them. What do they do? Make buy and sell decisions…and every buy or sell decision is timing the market!
The Fact… Most people believe “timing the market” means buying perfectly at the bottom and selling perfectly at the top. In reality it’s all about lowering risk by scaling in or out of trending markets and lowering portfolio volatility! TIMING IS NOT ABOUT GETTING IT PERFECTLY RIGHT ALL THE TIME. IT’S ABOUT GETTING IT “MOSTLY RIGHT MOST OF THE TIME!”
Myth #2: If I miss only a handful of positive days in the market my investment returns will plummet. Why does this myth exist? to keep you invested in buy-and-hold strategies The evidence sited….. The Bull Market from Jan 1984 through Dec 1998 S&P buy-and-hold return was 17.89% annually. Over this period, only a handful of trading days accounted for most of the market’s movement.
What you’ve probably heard before… If you missed the best days in the market, your average return dropped from 17.89% to…. # Of Trading Days Missed Best 10 Days 14.24% 20 Days 11.99% 30 Days 10.01% 40 Days 8.23% Source: Financial Planning Association Journal, May 2005: ‘Missing the Ten Best’ by Paul J. Gire, CFP®
What you’ve probably NOT heard before… Missing the worst days would have made a bigger impact: # Of Trading Days Missed Best Worst 10 Days 14.24% 24.17% 20 Days 11.99% 27.04% 30 Days 10.01% 29.45% 40 Days 8.23% 31.66% Source: Financial Planning Association Journal, May 2005: ‘Missing the Ten Best’ by Paul J. Gire, CFP®
# Of Trading Days Missed Missing the best and worst days beat the market buy-and-hold 17.89% average annual return: # Of Trading Days Missed Best Worst Both 10 Days 14.24% 24.17% 20.31% 20 Days 11.99% 24.04% 20.68% 30 Days 10.01% 29.45% 20.80% 40 Days 8.23% 31.66% 20.87% Source: Financial Planning Association Journal, May 2005: ‘Missing the Ten Best’ by Paul J. Gire, CFP®
RISK MANAGEMENT MATTERS! Fact Investment returns are enhanced by lower volatility and overall trend capture. RISK MANAGEMENT MATTERS!
Historical Trends: Secular Bear
Secular Bear Market Opportunities
No strategy can guarantee profit or protect against a loss. Past performance is not indicative of future results.
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