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Buying and timeout against the market
Many investors were taught to buy and maintain the best investment strategy. Nothing less than the teacher Jeremy Siegel, author of Stocks for the long term, 4th edition: The definitive guide to financial market returns and long-term investment strategy is a strong advocate of buying and keeping with the approach of this method. In a recent editorial in the Wall Street Journal, indicating that stocks were cheap and investors should buy now. With the Dow Jones to levels not seen since 1997, has been very hard for the buy and hold crowd. Could have done better by the time the inputs and outputs?
Buy and maintain
Crestmont Research provides an excellent tool for measuring income stock market during a period that began in 1901 and ended in 2008. Called the stock Matrix provides a measure of market compound annual return over a period of time. For example, from 1997 to 2008 compound annual return of an individual taxpayer would have been less than two percent. The compound annual return from 1987 to 2008 is two percent. I encourage you to take some time and review the list in Crestmont, as Ed Esterling does a great job in the analysis. You would have done better in a bank savings account.
It is interesting to see in the chart that better than stock Matrix an investor could be output in 2008 was to have invested in 1982. This would have generated a return of four per cent per annum compound. The returns generated by exit 2008 and enter 1998 to 2008 are negative. Not very surprising. Just a good sign for the buy and hold crowd.
Proponents of buy and hold told us to wait eight 10, 12 and even 15 percent returns on our money, according to financial institutions "seller" he was quoted. And I suspect that most these sales people are no longer employed to defend their falsehoods.
Your timing of entry and exit
What if you had a position of twenty years beginning in 1982 and had been able to leave their long positions in 2001, a year after the start of the bear market 2000. Again, looking at the stock Matrix Crestmont Research, your return would have been a medium composed of 7 percent. At least, that's a better return and hits the celebration of their cash in low interest bank account.
The 2000 bear market ended in 2002, as the market went up from there in late 2007. Again, what if he had fully invested in the S & P 500 in 2003, after the last bull market began, and were able to close in late 2007, when the most recent bear market broke. In that case, the statement of total amounted to 7 percent. Another good return on shares S & P 500.
Of course, hindsight is a wonderful thing. It's easy to look back and do this kind of what if and to show how a investor could do well. Moreover, by just following the purchase and sale of signs in the monthly chart of the S & P 500 lower, an investor could have received a similar benefit with just one of the S & P ETFs.
Since we are in a severe bear market, when the time comes it will be good for long, based on the monthly newsletter. Looking in the table above, that the time is still a number of months away.
The statement
The point of this article is that you can increase your profitability indicators following well-founded to help turn the buying and selling. Of course, you should not expect to be perfect at the time of purchase and sell. However, using the right indicators can go a long way to improve the odds in your favor. After all why we invest is to provide a financial secure future for our family and ourselves. We must use every tool that works to help us in this goal.
About the Author
Principle: Hans E. Wagner, CEO of Trading Online Markets LLC and Peregrine Advisors LLC
I began investing in high school and have remained active in the markets. A graduate of the US Air Force Academy with an MBA majoring in Finance from the University of Colorado, I continued to invest throughout my career in the US Air Force, Bank of America, Coopers & Lybrand, and working for Ross Perot before retiring at 55. During that time I have gained a very good understanding of what works and what doesn’t. I hope to impart that knowledge to others, so they can achieve financial independence as well.
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