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Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives -- Ignore unavailable to you. Want to Upgrade?

To: DD™ who wrote (49705)	5/6/2013 9:07:51 AM
From: GROUND ZERO™	Respond to of 221579

Excellent article, many thanks for posting it... GZ

To: DD™ who wrote (49705)	5/6/2013 10:25:41 AM
From: Kirk ©	2 Recommendations Respond to of 221579

I believe in regression to the mean so my fear of anyone jumping into this strategy would be similar to how poorly jumping into dogs of the Dow did for people back in the late 1990s... The chart is based on three approaches to investing $10,000 in the Dow in 1950. The horizontal red line at the bottom represents an investor who only invested in the unfavorable season of May 1 to October 31, and each year switched out of the market into cash for that year’s favorable season of Nov. 1 to April 31. That investor would have a loss of $1,251 (12.2%) over the 63 years. The second investor simply bought and held the Dow through the entire period, and would have a gain of $659,116. Not bad at all. But the green line represents the performance of an investor who followed the ‘Sell in May’ strategy of switching into the market on Nov. 1 and back out into cash on May. 1. The investor’s compounded return would be $943,130, or 43% more than buy and hold. It would be interesting to see the study and if they included reinvested dividends and where did they put the money when they were out of the market for 6 months. Just a 1% error from not accounting for reinvested dividends could swamp the 43%, 63 year advantage.