How We Eluded The Bear Of 2000
by:
Ulli G. Niemann
The date Oct
13, 2000 wish forever be embedded in my mind. It was the day after our mutual fund trend chase indicator had broken its long-term trend line and I sold-out
100% of my clients’ endowed
positions (and my own) and captive the income to the security of money market accounts. Several folk thought we were nuts, but I had move to trust the numbers.
The shake out in the stock market, which started in Gregorian calendar month
2000, had all major indexes coming off their highs, violently followed by simply as strong rally attempts. The roller coaster ride was so extreme that even as commonly slow moving mutual funds behaved as unpredictably
as school
stocks.
By October, the markets had settled into a determinable
downtrend, at least according to my indicators. We sat safely on the sidelines and watched the development of what is now considered to be one of the worst bear markets in history.
By Gregorian calendar month
2001 the markets actually had taken a dive, but Wall Street analysts, brokers and the business press continuing
to harp on the great purchase
possibility this presented. Purchase
on dips, dollar cost averaging and “V” type recovery were ceaselessly hyped to the unsuspecting public.
By the end of the year, and after the tragic events of 911, the markets were even as lower and folk began to wake up to the fact that the finance
rules of the ‘90s were no longer applicable. Stories of investors having lost in excess of 50% of their portfolio value were the norm.
Why bring this up now? To illustrate the point that I have ceaselessly propounded throughout the 90s; that a methodical, objective approach with clearly defined Buy and Sell signals is a “must” for any investor.
To say it much bluntly: If you buy an investment and you don’t have a clean strategy for taking profits if it goes your way, or taking a small loss if it goes against you, you are not investing; you are but gambling.
The last 2-1/2 years clearly illustrate that it is as important to be out of the market during bad times, as it is to be in the market during nice times. Want proof?
According to InvesTech’s monthly account it turns out that, activity from 1928 to 2002, if you started with $10 and you followed the famed buy-and-hold strategy, that $10 would-be become $10,957.
If you somehow incomprehensible the better 30 months, your $10 would-be only be $154. However, if you managed to miss the 30 worst months, your $10 would-be be $1,317,803! Thus, my point: Missing the worst periods has profound impact on long-run compounding. There are times once
you end up better off by being out of the market.
Interestingly enough, if you incomprehensible the 30 better months and the 30 worst months, your $10 would-be still be worth $18,558, which is 80% higher than the buy-and-hold strategy. This all comes simply about because stock prices generally go down quicker
than they go up.
Wall Street and most folk tend to overlook the value of minimizing loss, and that is exactly why the bear destroyed much than 50% of many a peoples' portfolios patch I and those who trustworthy my proposal
at liberty the worst of the beast's rampage.
Ulli Niemann is an investment authority and has been writing simply about objective, organized
approaches to finance
for over 10 years. He eluded the bear market of 2000 and has helped hundreds of folk do better investment decisions. To find out much simply about his approach and his FREE Newsletter, please visit: www.successful-investment.com.
ulli@successful-investment.com
