Missing the Market

  • Written by David
  • January 7, 2008 at 1:32 pm
  • 0

  • Hey, not a bad idea, I wish it were just that easy.

    I’ve enclosed the always illuminating “missing the market” study that we as investors need to be reminded of from time to time. It is especially important now that the markets have displayed so much price movement up and down.

    The Goldman study is from 1985 to 2006. Their findings are reflected in the enclosed data above. (click on above image to enlarge) The reason for this review now, is that it is VERY easy as an investor, right now, to deviate from one’s own well thought-out long-term investment strategy with a short-term emotional reaction.

    Here’s how I have always looked at this study. In this particular Goldman study there are 5297 total investable trading days. Missing just the best 40 days of 5297 days, (those 40 days, btw, are only 7/10 of one percent of the total investable days, 40/5297), one’s return would have cratered to 1.87% down from 12.12%.

    So with those 40 days representing less than one percent of the total time frame, we as investors had 99% of the time to talk ourselves out of our own well conceived, long-term investment strategies!

    Our emotions do take on an adversarial role in markets like this, really!

    The ‘missing the market’ study will suggest that ‘staying the course’ is the right thing to do all be it hard to do when markets are so unnerving and going down in value…




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