The Good, the Bad, and the Beautiful

Curiosity and a fellow research guru prompted us to look back historically at a $1 investment in the S&P 500 under three different strategies.  Beginning in January of 1966 we tracked the performance of the smartest strategy: removed the five worst days in the S&P each year, and the least smart (avoiding insult): removed the five best days each year.  Each was calculated assuming the investor was to buy $1 worth of S&P shares, sell them before the day of the big move (+/-) and then buy back new shares the next day.  They are both compared below to a simple buy and hold strategy below. 

Comments

[Chad]

Now if you can just tell us when the bad days are more likely to occur... and when the good days are...

[M Rubesch]

So, the Perfect-Timer gets 151x the return of the Buy-n-Holder, a factor worth pointing out, as the number is aptly reminiscent of high-octane rum. But seriously, this is an excellent chart and a powerful message. Thank you!

[Chris]

So many confused 'inevstors' or should i say 'stock market gamers'. Who really invests in a company?
Not many. Most just game the markets. Admit it.

The only way you are going to consistently win over time is to specifically trade price, on purpose. Invest in price patterns. Forget trying to invest in 'companies' - no one ever does anyways.