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Strategies & Market Trends : The Rational Analyst -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (1674)	9/12/1999 7:14:00 PM
From: HeyRainier	Read Replies (2) \| Respond to of 1720

[ The Myth of "The Forty Best Days" ] The following is some information from a promotional piece of Marty Zweig's company: _____________________________________________________________________ As usual, Mark Twain said it best: There are three kinds of lies: Lies, Damned Lies, and Statisitics." Here's a statistic from the "buy-and-hold" school: Average Annual Return for S&P 500 from 1980-1989: 17.6% But if you missed the best: Your avg. annual return falls to: -------------------------- -------------------------------- 10 days 12.7% 20 days 9.6% 30 days 6.9% 40 days 4.4% This "study" purports to tell you to buy-and-hold forever and always, because if you miss the good days, bad things happen to you. At Zweig, we politely ask (and this is something I myself asked a fellow portfolio manager in a conversation not-too-long ago): What if you missed the bad days? If you missed the worst: Your avg. annual return soared to: -------------------------- -------------------------------- 10 days 26.6% 20 days 30.5% 30 days 33.8% 40 days 36.9% Nobody's encouraging you to miss good days. But at Zweig we say: The key to success in equity investing is being out of harm's way on the really bad days! And that takes active risk management from Zweig. Oh, and by the way... Even if you missed the best and worst days, you outperformed the heck out of "buy-and-hold" with a much, much smoother ride! By missing the best & worst: Your avg. annual return was: -------------------------- -------------------------------- 10 days 21.1% 20 days 21.4% 30 days 21.4% 40 days 21.3% _____________________________________________________________________ (Note: the source of the above data is from Ned Davis Research.) This is good stuff to know, and provides the balancing argument on the merits of active portfolio management. Rainier