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Thread: Stock market summary, any experts care to correct?

  1. #1

    Stock market summary, any experts care to correct?

    According to this report by Putnam investments, a person who invests in a 15 year period between Dec 2004-Dec 2019, would have an annual return of 9% per year.

    Not bad, but the keyword here is "consistently".

    If he only missed 10 of the best days in the 5475 days, his returns drop to 4% average per year.

    https://www.putnam.com/literature/pd...1e1e47a6d4.pdf

    Isn't this basically saying, if you can't invest every single day, you might as well just invest in bonds and CDs? After all, you'll get 1-3% guaranteed.



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  3. #2
    I think it means you have to keep your funds in and if you take your funds out at the bottom and miss the colossal rebounds, then you will screw yourself over.
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  4. #3
    Quote Originally Posted by dannno View Post
    I think it means you have to keep your funds in and if you take your funds out at the bottom and miss the colossal rebounds, then you will screw yourself over.
    Ok, that makes senses.

    What's still very hard to swallow for me is that you only need to be unlucky 10 out of 5500 days.
    Is that "easy" to do because you only need 10? or "hard" to do because you need to be wrong on the "right" 10?

  5. #4
    Quote Originally Posted by PRB View Post
    According to this report by Putnam investments, a person who invests in a 15 year period between Dec 2004-Dec 2019, would have an annual return of 9% per year.

    Not bad, but the keyword here is "consistently".

    If he only missed 10 of the best days in the 5475 days, his returns drop to 4% average per year.

    https://www.putnam.com/literature/pd...1e1e47a6d4.pdf

    Isn't this basically saying, if you can't invest every single day, you might as well just invest in bonds and CDs? After all, you'll get 1-3% guaranteed.
    Yes and no . It means you put it in and keep it in and then you catch those ten good days . That may only work though if you are not planning on retiring 2004 - 2019 . In that case I could dump it in a savings account at my life Ins Co get 4 percent guaranteed which is just as good without the ten best days and no risk. So yes it will work but it is for the young and not the old. I retired about 4 or 5 yrs ago . I cashed out all my 401K's . I waited until then to get back the 50 percent I lost in 2008 .

  6. #5
    My suggestion is if you have twenty or more years before retiring roll the dice . Because it is a volatile crapshoot that consistently overvalues and crashes now and it is gambling . At least take the free money if your employer gives a match . If you plan to retire in a decade or two and have a lot of money in that is different . Think about ways to protect it then.

  7. #6
    I still can't believe Domino's Pizza is one of the best performing stocks of the decade.

  8. #7
    Quote Originally Posted by PRB View Post

    Isn't this basically saying, if you can't invest every single day, you might as well just invest in bonds and CDs? After all, you'll get 1-3% guaranteed.
    Sort of. You shouldn't be in the stock market with money that you plan on using within five or so years and probably even longer.

    Quote Originally Posted by PRB View Post
    Ok, that makes senses.

    What's still very hard to swallow for me is that you only need to be unlucky 10 out of 5500 days.
    Is that "easy" to do because you only need 10? or "hard" to do because you need to be wrong on the "right" 10?

    That is a statistical sleight of hand that financial salesmen use to get people to always be fully invested because timing is hard. It would be impossible to miss the ten best days without missing most of the ten worst days in which case it would be roughly a wash. They occur in clusters in the same time period. For example. Many of the the best and worst days in stock market history occurred back to back in the last month.

  9. #8
    Quote Originally Posted by Krugminator2 View Post
    Sort of. You shouldn't be in the stock market with money that you plan on using within five or so years and probably even longer.




    That is a statistical sleight of hand that financial salesmen use to get people to always be fully invested because timing is hard. It would be impossible to miss the ten best days without missing most of the ten worst days in which case it would be roughly a wash. They occur in clusters in the same time period. For example. Many of the the best and worst days in stock market history occurred back to back in the last month.

    Thank you!
    That makes a lot of sense.
    The admission is very telling too.

    When we say "best days vs worst days" do we basically mean best % gain or loss from the previous day?

    Because, if the market went up 10 days in a row, all 2% each, that would be a 24% gain, but none of them would be "best days"
    So a person who missed 1 best day may make up for it in these 10.



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  11. #9
    Quote Originally Posted by PRB View Post
    Thank you!
    That makes a lot of sense.
    The admission is very telling too.

    When we say "best days vs worst days" do we basically mean best % gain or loss from the previous day?

    Because, if the market went up 10 days in a row, all 2% each, that would be a 24% gain, but none of them would be "best days"
    So a person who missed 1 best day may make up for it in these 10.
    I only care about percentage terms.

    Bull markets tend to be grinding and not have "best days" in percentage terms. They tend to be a lot small gains that just keep going up. Bear markets tend to have violent down moves and violent retracements.

    A very simple way to match the market with a lot less stress is to never be long when it is under the 200 day moving average. You would miss all of the best days which the Putnam sales literature says is just catastrophic. But you would get roughly market returns with much lower volatility. I first saw this over 10 years ago. Here is the original paper I read https://papers.ssrn.com/sol3/papers....ract_id=962461

    This article draws on this and has similar data on just this and matches what I said if you can't download the paper. https://seekingalpha.com/article/420...set-allocation

  12. #10
    Quote Originally Posted by Krugminator2 View Post
    I only care about percentage terms.

    Bull markets tend to be grinding and not have "best days" in percentage terms. They tend to be a lot small gains that just keep going up. Bear markets tend to have violent down moves and violent retracements.

    A very simple way to match the market with a lot less stress is to never be long when it is under the 200 day moving average. You would miss all of the best days which the Putnam sales literature says is just catastrophic. But you would get roughly market returns with much lower volatility. I first saw this over 10 years ago. Here is the original paper I read https://papers.ssrn.com/sol3/papers....ract_id=962461

    This article draws on this and has similar data on just this and matches what I said if you can't download the paper. https://seekingalpha.com/article/420...set-allocation
    Cool. thanks for that!

  13. #11
    So what we have established here is unless PRB is young he should invest with Oyarde instead of the stock market .

  14. #12
    Quote Originally Posted by oyarde View Post
    So what we have established here is unless PRB is young he should invest with Oyarde instead of the stock market .
    SOLD! That was easy

  15. #13
    would this also be a fair summary?

    Unless you were actively trading daily, you're not likely to time and miss the best and worst 10 days.

    Instead, if you were trading on week to week or month to month frequency, most of your trades would already include those best and worst days.

    Therefore, even if you're not invested all 365 days each year, as long as you don't perfectly lose each of those best days, you'll be OK.

  16. #14
    Quote Originally Posted by PRB View Post
    would this also be a fair summary?

    From you? No.
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  17. #15
    Quote Originally Posted by PRB View Post
    would this also be a fair summary?

    Unless you were actively trading daily, you're not likely to time and miss the best and worst 10 days.

    Instead, if you were trading on week to week or month to month frequency, most of your trades would already include those best and worst days.

    Therefore, even if you're not invested all 365 days each year, as long as you don't perfectly lose each of those best days, you'll be OK.
    Pretty much . Say you see some fund at Vanguard or whatever you think you like . Look at its performance the last decade and think you want to put some in . Putting it in weekly or biweekly and leaving it you will catch all the positives (and negatives ) but at the end of the 20 years you should be up more than leaving in the checking account at a credit union .

  18. #16
    Quote Originally Posted by NorthCarolinaLiberty View Post
    From you? No.
    Can you give a better one?



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