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this is VERY important
the writer is a PhD in MIT university
read carefully
Ben
----- Original Message -----
From: "Bob Fulks" <bfulks@xxxxxxxxxxxx>
To: "'Lucky Bastard'" <hadrada@xxxxxxxxxxx>; <omega-list@xxxxxxxxxx>
Sent: Tuesday, July 23, 2002 7:29 PM
Subject: Re: U of Michigan study on Market Timing.
> At 6:32 PM -0400 7/22/02, 'Lucky Bastard' wrote:
>
> >Can someone point me to the URL that leads to the University of Michigan
> >study on Market Timing? Or the title of that study? The one where all the
> >mutual fund pundits use to say that Market Timing doesn't work...that if
you
> >miss the 10 best days, your return doesn't beat buy-n-hold (the
> >bag)....leaving out that if you miss the 10 worst days, you'd beat
> >buy-n-hold (the bag)....and if you sell an X % from the top and buy X%
above
> >the bottom, you'd still beat buy-n-hold (the bag).
>
> This study is widely quoted by brokerage companies as the reason people
> should stay in the market no matter what. Hogwash...
>
> I duplicated the study several years ago:
>
> > Invest $1000 in the S&P 500 index fund in 1/5/70
>
> > On 4/1/01 (7902 trading days later) it would be worth $11,839
> (Average 8.2%/yr over 30+ years)
>
> > Missing the best 1% (79) days would reduce value on 4/1/01 to $894 -
> a loss of $106 over 30+ years. So missing the best 1% of days erases
> all profits so you need to stay in the market - right? WRONG!
>
> > Missing the worst 1% (79) days would increase value on 4/1/01 to
> $206,445 (Average 17.8%/yr over 30+ years).
>
> > What would the account be worth if we avoided all the down days
> over the 30+ years? $1,894,433,971,569,410
>
> The attached figure shows the result of sorting the 7902 days such
> that the biggest gains occur first and the biggest losses occur last.
> The reinvested profits build up to $1,894,433,971,569,410 then
> decrease back to $11,839.
>
> Conclusion: Market timing is incredibly effective but hard to do
> without a good trading system...
>
> Bob Fulks
>
>
>
>
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