Expecting a crash...but staying the course

[simplesauce]

If you look at the stock charts, it has been a straight line up for a very long time.

I sometimes have urges to pull out of the market and wait for prices to get slashed.

But I always go back to these words from Charlie Ellis. He explains (summarized and paraphrased):

The historical statistics shows what happens to long-term compounded returns when the best days are removed from the record. Taking 10 best days - less than one-quarter of 1 % of long period examined - cuts the average rate of return by 17 %( from 18% to 5%). Taking the next 10 days away cuts returns by another 3 %. Removing a total of 30 days - just half of 1% of the total period - cuts return almost by 40% (from 18% to 11%).

Using S&P 500 average returns, the story is told quickly and clearly; all the total returns on the stocks in the last 75 years were achieved in the best 60 months - less than 7% of the 800 months of those long decades. If you missed those few and fabulous 60 months, you would have missed all the total returns accumulated over three generations. Removing five best days out of 72 years of investing would reduce cumulative compound returns - without dividend investments- by nearly 50%.

[k66]

If you look at the stock charts, it has been a straight line up for a very long time.

I sometimes have urges to pull out of the market and wait for prices to get slashed.

But I always go back to these words from Charlie Ellis. He explains (summarized and paraphrased):

The historical statistics shows what happens to long-term compounded returns when the best days are removed from the record. Taking 10 best days - less than one-quarter of 1 % of long period examined - cuts the average rate of return by 17 %( from 18% to 5%). Taking the next 10 days away cuts returns by another 3 %. Removing a total of 30 days - just half of 1% of the total period - cuts return almost by 40% (from 18% to 11%).

Using S&P 500 average returns, the story is told quickly and clearly; all the total returns on the stocks in the last 75 years were achieved in the best 60 months - less than 7% of the 800 months of those long decades. If you missed those few and fabulous 60 months, you would have missed all the total returns accumulated over three generations. Removing five best days out of 72 years of investing would reduce cumulative compound returns - without dividend investments- by nearly 50%.

Ah, but what if you could exclude the worst 60 months (from the last 75 years) instead? How golden would you be then?

And there, I believe, lies the glittery lure of market timing!

[Ron Scott]

Better yet if you can treat your stocks like a business you don't need to sell to live, and tell yourself that business is going to grow in 2 ways. First, through normal appreciation and dividend growth. Second through purchases of additional stock whenever there's a correction of 20% or more.

"Buy low and hold."

Of course you need to live by the premise to make this work...

[MotoTrojan]

If you look at the stock charts, it has been a straight line up for a very long time.

I sometimes have urges to pull out of the market and wait for prices to get slashed.

But I always go back to these words from Charlie Ellis. He explains (summarized and paraphrased):

The historical statistics shows what happens to long-term compounded returns when the best days are removed from the record. Taking 10 best days - less than one-quarter of 1 % of long period examined - cuts the average rate of return by 17 %( from 18% to 5%). Taking the next 10 days away cuts returns by another 3 %. Removing a total of 30 days - just half of 1% of the total period - cuts return almost by 40% (from 18% to 11%).

Using S&P 500 average returns, the story is told quickly and clearly; all the total returns on the stocks in the last 75 years were achieved in the best 60 months - less than 7% of the 800 months of those long decades. If you missed those few and fabulous 60 months, you would have missed all the total returns accumulated over three generations. Removing five best days out of 72 years of investing would reduce cumulative compound returns - without dividend investments- by nearly 50%.

Ah, but what if you could exclude the worst 60 months (from the last 75 years) instead? How golden would you be then?

And there, I believe, lies the glittery lure of market timing!

Per my book More Than You Know by Mauboussin, S&P 500 from 1/3/79 to 3/30/07, excluding dividends the return was 9.5%. Had you been able to avoid the worst 50 days, return would have been 18.2%. If you missed the best 50 days, return would've been 0.6%.

[WanderingDoc]

When they say you stayed in the best days etc., they just mean to be invested in the market right? Not necessarily that you were DCA'ing during that time.

[david1082b]

Removing five best days out of 72 years of investing would reduce cumulative compound returns - without dividend investments- by nearly 50%.

Ignoring dividends makes no sense really. Dividends have made up a huge amount of total returns historically.

If you missed those few and fabulous 60 months, you would have missed all the total returns accumulated over three generations.

Total return by definition includes dividends. But the statement makes it clear that dividends are not included? This is a bizarre way of calculating long-term returns. All the talk about "best days" and "worst days" is just noise imo.

[RRAAYY3]

This “bulletproof bull market” nonsense needs to stop.

It has had corrections ... including one literally happening at the moment. the hysteria is laughable

[Toons]

Bring on the "Crash"=Opportunity

[midareff]

My wife thinks she can read the market in her Tarot cards. I try to humor her but she doesn't get to hold the keys to the kingdom..