Session 120–“Timing this market is guaranteed to make you a loser”

Mark Hulbert

Mark Hulbert

These words were penned with a great deal of authority by Mark Hulbert, Editor, Hulbert Financial Digest… a compendium of investment letter writer opinion. In fact, in all my days as a broker the only thing that I was able to warrant as ‘guaranteed’ were United States Government securities. Thanks to recent shenanigans in Congress, even this guarantee has been called into question. At any rate, I believe Hulbert’s piece (‘Timing this market is guaranteed…”-MarketWatch, 8/8/2014) is a perfect counterpoint to those who believe ‘buy and hold’ is dead as an investment strategy. It also is an antidote to a financial media that spends an inordinate amount of time obsessing about ‘timing the market’…when do we buy or sell next?

Richard Russell Guru

Richard Russell

 The answer might be ‘just hang in there’

A Case in point from Mr. Hulbert:

“Consider what happened to Richard Russell, the renowned editor of the Dow Theory Letters advisory service, in the wake of his almost-perfect sell advice within a day of the bull-market top in August 1987 — two months before the worst single-day crash in U.S. history.

What happened next is telling. As the market battled back, Russell stayed out of stocks — and didn’t get back in until August 1989, when the market was near the same level it had been when he issued his call to sell two years earlier.

A Hulbert Financial Digest study of the past 15 years shows that Russell’s experience is more the rule than the exception. Just 11 of the 81 stock-market timers — those advisers who try to predict when to get into or out of the market to sidestep declines and participate in rallies — actually made money during the bear market that began after the Internet bubble burst in March 2000 and ended in October 2002.

These market timers have lost so much since then that, on average, they are in the red over the entire period since March 2000, having chalked up a 0.8% annualized loss.

A simple buy-and-hold approach using the Wilshire 5000 over the same period, by contrast, gained an annualized 4.2%, including reinvested dividends.”

The above 15 year return for a ‘buy and hold’ investor would have been icing on the cake as the decade of the 1990s was a fabulous bull market  where even the narrower S & P 500 produced an 18% compounded annual return…the wages of not paying attention to the noise.

“Is now the time investors should move to cash?’

Questioning 30-something with pipe

Questioning 30-something with pipe

CNBC’s web site was asking the question again yesterday. Maybe a better question would be, ‘How will I know when to get back in?” At least this is the question the guru, market letter writers should have asked before they posted their market sell recommendations. In the end, their subscribers were the losers.

Is ‘buy and hold’ investing really dead?

The information presented in represents my own opinions and does not contain recommendations for any particular investment or securities.  I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions.  These are not meant to be construed as recommendations to BUY or SELL.  All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.


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