G
Guest
Guest
imported post
This is an interesting article from a newsletter I receive. I'll be going 100% G today because my system is telling me to, but it's nice to know the trends are behind me too!! :^
Good luck,
M_M
In terms of investing, Thanksgivingoffers some evidence that suggests a Seasonality Timing System,
first
introduced by Norman Fosback three decades ago, that can add a considerable
boost to your returns. Hulbert Financial Digest editor Mark Hulbert,
who
tracks the system, has found that this "simple, mechanical timing
system,
based on nothing more than the calendar, has beaten every other market
timing
system that the HFD has tracked over the past 20 years."
Generally speaking, the Seasonality Timing System suggests that
investors
who dollar-cost average should schedule their monthly investing around
the
first and last trading days of the month. Doing so, according to Mr.
Hulbert --
i.e. switching between cash (specifically a money market fund) and the
market
(specifically the Wilshire 5000) -- would have yielded a 15.4% return
over the
past 20 years, versus a 12.8% return for a buy-and-hold market
strategy. The
system has also proven much less volatile than a buy-and-hold strategy
-- 45%
less.
The specific rules call for buying at the close of the third-to-last
trading
session of each month and selling at the close of the fifth trading
session of
each month. The rule is similar for holidays when the market is
shuttered: Buy
on the third-to-last trading session prior to a holiday and sell at the
close of the
last trading session prior to a holiday.
Every rule has its exceptions, of course. When the holiday occurs on
the first
trading session of the week, which is usually a Monday, evidence
suggests
waiting to sell until the close of the trading session after the
holiday.
Thanksgiving is another exception. The rule here is to wait to sell
until the
close of trading on Friday.
Why does Seasonality Timing work? Theories abound. One theory is that
investors who dollar-cost average tend to do so around the beginning of
the
month. Another theory suggests it's a function of investor behavioral
health:
When investors are happier, they tend to buy more than sell.
You needn't dollar-cost average to exploit this weirdness. Just knowing
how
most investors act in certain situations can pinpoint propitious entry
points.
Thanksgiving can't quite be counted on to deliver excess returns, but
going
back to 1950, the Tuesdays and Wednesdays before Thanksgiving have been
positive days for the market approximately 60% of the time.
That's not really compelling, but it does give the turkey leg up to
Thanksgiving, and anything that increases our odds is worthy of
consideration.
Add to the mix the fact that we've entered the sweet spot of investing,
the
November-April period, which has outperformed the May-October period
70% of the time, and by a huge margin, and you've got a spicy recipe,
indeed.
Gobble-gobble.
This is an interesting article from a newsletter I receive. I'll be going 100% G today because my system is telling me to, but it's nice to know the trends are behind me too!! :^
Good luck,
M_M
In terms of investing, Thanksgivingoffers some evidence that suggests a Seasonality Timing System,
first
introduced by Norman Fosback three decades ago, that can add a considerable
boost to your returns. Hulbert Financial Digest editor Mark Hulbert,
who
tracks the system, has found that this "simple, mechanical timing
system,
based on nothing more than the calendar, has beaten every other market
timing
system that the HFD has tracked over the past 20 years."
Generally speaking, the Seasonality Timing System suggests that
investors
who dollar-cost average should schedule their monthly investing around
the
first and last trading days of the month. Doing so, according to Mr.
Hulbert --
i.e. switching between cash (specifically a money market fund) and the
market
(specifically the Wilshire 5000) -- would have yielded a 15.4% return
over the
past 20 years, versus a 12.8% return for a buy-and-hold market
strategy. The
system has also proven much less volatile than a buy-and-hold strategy
-- 45%
less.
The specific rules call for buying at the close of the third-to-last
trading
session of each month and selling at the close of the fifth trading
session of
each month. The rule is similar for holidays when the market is
shuttered: Buy
on the third-to-last trading session prior to a holiday and sell at the
close of the
last trading session prior to a holiday.
Every rule has its exceptions, of course. When the holiday occurs on
the first
trading session of the week, which is usually a Monday, evidence
suggests
waiting to sell until the close of the trading session after the
holiday.
Thanksgiving is another exception. The rule here is to wait to sell
until the
close of trading on Friday.
Why does Seasonality Timing work? Theories abound. One theory is that
investors who dollar-cost average tend to do so around the beginning of
the
month. Another theory suggests it's a function of investor behavioral
health:
When investors are happier, they tend to buy more than sell.
You needn't dollar-cost average to exploit this weirdness. Just knowing
how
most investors act in certain situations can pinpoint propitious entry
points.
Thanksgiving can't quite be counted on to deliver excess returns, but
going
back to 1950, the Tuesdays and Wednesdays before Thanksgiving have been
positive days for the market approximately 60% of the time.
That's not really compelling, but it does give the turkey leg up to
Thanksgiving, and anything that increases our odds is worthy of
consideration.
Add to the mix the fact that we've entered the sweet spot of investing,
the
November-April period, which has outperformed the May-October period
70% of the time, and by a huge margin, and you've got a spicy recipe,
indeed.
Gobble-gobble.
Being out for Monday (or Tuesday).
