Monday, January 25, 2016

How the "How missing out on 25 days in the stock market over 45 years costs you dearly" stories are bullshit

“Time in the market, not timing the market” is the rallying cry for buy-and-hold investors.

Charts like the one below show the damage an investor would have done if they missed out on only the 25 best days (of 11,620) since 1970. If you somehow managed to do this, your returns would have gone from 1,910% to 371%, or 6.7% a year to 3.4%..."

No mention of missing the worst days

"Ask yourself these questions before you dump stocks and funds in a panic

...anyone truly convinced that a massive bear market is about to begin is likely out of the market already. For example, some $24 billion was pulled from stock funds over the first three weeks of 2016"

Everyone who was going to get out, 
got out?

"...the value of missing the worst-performing days ...from 1994 to 2013.

If the 40 worst-performing days of the S&P 500 Index were missed, an investor's increased return would have been 893% more than investors who stayed in the market every day throughout the entire 20 years..."

...If the 40 best-performing days were missed, an investment in the S&P 500 turned negative, with $10,000 eroding in value to just $8,149, a loss of $1,851.

Notice the source
Miss the best 40 = $10,000 to $8,149
Miss the worst 40 = $10,000 becomes $89,300,
but it says "893% more than investors who stayed in the market",
which means 893% more than around the "1,910%" from the first anecdote

Notice how they didn't really say what the returns would actually be?

Notice how they don't say it in most of the news
which tries very hard to keep as many in the market
for as long as possible,
regardless of the fundamental breakdown.

What is more likely in the near term?

More best good days or bad?

It's in the best interests of the owners of the media
to keep as many investors invested as long as possible.

It's in the best interests of the financial industry
to keep investors invested as much as possible.

If I've got $100,000 under management, 
and I'm charging 2.5% per year, 
I'm and whomever the manager/insurance company etc...
is taking $2,500 per year from that money.

If a client calls in one day and says 'I want out'
and buy me a one year treasury bond, 
I would make $100, once
and may not make another dime from the money for a year.

The 'stay the course' strategy is parasitic in nature.

So compare the interests of those advising you to stay invested
even if they are fiduciaries.

$2,500 for missing the 25 Best;

$16,000 for missing the 25 worst;

Please consider missing some of the worst days

It's the opposite of what I have been told to tell for 30 plus years