DJIA 1966 - 1982

Friday, September 09, 2005 | 08:30 AM

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. 
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Dow Jones Industrial Average, 1966 - 1982
click for larger chart

1966_1982_rydex

data for chart courtesy of Bloomberg

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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


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Source:
Investing —More of a Challenge
Rydex Funds
http://www.rydexfundsfp.com/pdf/ium_6pager.pdf

Friday, September 09, 2005 | 08:30 AM | Permalink | Comments (11) | TrackBack (0)
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Comments

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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