Hello DAK, Interesting statistics. From Bill Fleckenstein's column yesterday:
Let me just state here that the main focus of my column has always been to try to help people avoid losing money, as I have felt that the market was headed lower. People sometimes underappreciate the value of not losing money. Along those lines, I'd like to share a couple of recent statistics from Jim Stack, in his ever-insightful monthly letter, found at www.investech.com. It turns out that, measuring from 1928 to 2002, if you started with $10 and you followed the famous buy-and-hold strategy, that $10 would become $10,957. If you missed the 30 best months, your $10 would only be $154. However, if you missed the 30 worst months, your $10 would be $1,317,803. One can see from these numbers that missing the worst periods is very important to long-run compounding.
Interestingly enough, if you missed the 30 best months and the 30 worst months, your $10 would still be worth $18,558, which is 80% higher than the buy-and-hold strategy. This all comes about because stock prices tend to go down faster than they tend to go up, and tend to do so in compressed periods. Wall Street and most people tend to overlook the value of not losing money, which is why this has been such a keen focus of mine.
Someday, when values return, and when the risk/reward equation is skewed to the long side, I hope to be able to turn my attention more to making money, rather than the avoidance of the loss of it. |
