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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Seldom_Blue who wrote (20922)3/21/2000 3:35:00 PM
From: Mike Buckley  Read Replies (2) of 54805
 
Seldom,

It appears at a glance that you only carried your investment period out 29 years. Based on the way you set up the initial investment, the value at the 30th year in your table is in the beginning of the year, not the end of it.

As for your buy/sell discount, your table proposes that you will be able to buy a stock on average at a 5%, 10% or 15%discount to the price you sold it the exact same day. As you're aware, that will never happen as often as your table suggests it might.

I understand that you're doing some rounding of dates and that it might indeed be possible to nuy the stock at a discount a day, week or month later. But the trick is to knowing that in advance. When you factor in the number of times that traders buy those stocks at a higher price than when they sold it, and after having let their cash assets sit in a money market fund for weeks or months, that so-called average discount becomes mighty skewed as does the so-called average annual return of 15%.

Why did I assume a 15% average annual increase in two-year cycles? It wasn't because I was making the assumption that an investor would buy the same stock for 15% less than it was sold. Instead, I was making the assumption that whatever decision the investor made, over time it would average out to a 15% annual increase over a two-year period. That's far different from assuming one can immediately buy a stock for less than it was sold.

Make sense?

--Mike Buckley
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