DJIA 1966 - 1982
The previous chart reveals the long standing secular moves of the markets; What's an investor to do during one of the long periods of weakness?
One answer is to learn to be more nimble, and trade the cyclical markets.
During this period, we see rallies as much as strong as 75% and sell offs as brutal as 45%.
This is not a goo9d environment for the Buy and Hold approach. It works well ONLY during secular -- not cyclical -- Bull phases. You can hold stock for decades if you buy into the early stages of a secular period. Think of the years right after 1935, 1946 or 1982. But if you by at the wrong end of a secular run -- 1929, 1966, or 2000 -- and it took many years to get back to breakeven; and thats before inflation:
1929 purchase breakeven = 1954 (25 years)
1966 purchase breakeven = 1982 (16 years)
2000>(breakeven = ?)
History suggests that a top ticking Nasdaq holder will not return to breakeven -- 5100 -- until between 2015-25
Investing —More of a Challenge
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Great idea if the timing works out. Can you point to many money managers who consistently were able to profitably time the movements of the broad market over a decade after accounting for transaction costs and tax effects?
Posted by: royce | Sep 9, 2005 10:56:50 AM
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