So you think you can time the market?
Or perhaps you feel that you know someone that can.
They may even be a financial professional, investment advisor, or money manager.
Is it really achievable and better yet even worth trying???
The market performance of the Dow Jones Industrial Average over the last 15 years was 7.28% per year. Many other market indexes would provide similar returns, but this is the one that we will use for the basis of this discussion.
There are 252 trading days per year. Which equates to exactly 3780 trading days over the entire 15 year period.
By simply missing just 10 of the best days in the market over the 15 year period (or .2% of the days missed) would reduce your return by 4.68% per year to only
By missing the 20 best days out of the 3780 trading days your return drops to -0.25%!!!
That’s right…a negative return
…All by missing merely .4% of the trading days over the past 15 years.
Okay, so you might be thinking “I can time the market and miss some of the worst days in the market to make up for it.”
But as Warren Buffet stated in his recent shareholder address to shareholders of Berkshire Hathaway,
“I have never met anyone who can consistently beat the market, nor have I met anyone that has met anyone that could either.”
Remember that the math statistically works against you over time just by strict probability.In order to outperform the market you have to get 3 variables correct continually when trading.
First, What company you are selling…
Second, What company you are buying…
Third, The timing of both the buying and selling…
***Not to mention the fees…Add fees on top of this and you can see why it has proven to be virtually impossible to beat the overall market performance by mutual fund and hedge fund managers***
So the question comes then… What type of investment portfolio would actually help take advantage of such opportunities? Are there any?
Well, first we need to forget speculation and trying to buy individual stocks and companies at “perfect” times. That simply not sustainable over time. But using proper asset allocation you can almost certainly take advantage of these so called “best trading days.”
Here is how…
It’s vitally important to realize that 9 out of the 10 best trading days occurred within 2 weeks of the worst trading days. So, by simply moving cash into the market following those worst trading days you were virtually guaranteed to miss 9 out of 10 of the best performing market sessions. And therefore a great probability for a strong investment return over time.
Question for you though….How do you buy more of the market if you’re invested in the market?
As your portfolio and assets are also dropping in lockstep with the market…
That is why it is imperative to own “Non-correlated” investments alongside your stock market investments.
You would never sell low to buy low. That is straight useless.
Non-correlated means that they move in somewhat opposite directions relative to that of the market.
So what type of investments will actually grow or at the very least maintain their values as the stock markets sell off?
The most NON-Correlated investments are Long Term US Treasuries and Precious Metals such as Gold and Silver.
Yup. Not sexy, certainly not fancy…but proven to be the most valuable investments you should own during periods of market turmoil.
…And it just might allow you to invest into the market in order to take advantage of the upcoming best performing trading days that all investors so desperately search for.
To learn more about how to effectively use non-correlated assets inside an investment portfolio, visit our Risk Parity Asset Allocation Tutorial at http://www.precedencecapital.ca/risk-parity-course
Precedence Capital / Gravitas Securities Inc. –
The views, opinions and positions expressed by the author and those providing comments on these blogs are theirs alone, and do not necessarily reflect the views, opinions or positions of Gravitas Securities Inc.