Crew Capital Management Thoughts on Investment

Welcome to the Crew Capital Management Thoughts on Investment blog. At Crew Capital, investment education is key to how we work with our clients. We hope our conversation and analysis entice you to think further on your investment strategies and planning. For further discussion, please contact us at rjung@crewcapital.com

Thank you!
Robert F. Jung, CFA CPA*

*CPA inactve

Tuesday, October 14, 2008

From Our Reading This Morning...

The Dangers of Timing the Market
Seeking Alpha, October 14, 2008, David I. Templeton

Today's sharp move higher in the stock market sheds light on the dangers of an investor trying to time the market. I wrote a post earlier this year, Focus on the the Long-Term, in which it was noted missing just a handful of the market's best days in a given year can really penalize returns. If an investor missed just 40 of the biggest up days in the market over the last 20 years (1987-2007), their return would have totaled 3.98% versus remaining fully invested and achieving an average annualized return of 11.82%.

The market research firm DALBAR went one step further and looked at the returns of mutual fund investors over the 20-year period, 1986-2006, and reported the average market timer return was -2%. During this same time period, the S&P 500 Index returned 12%.
  • Additionally, during the 10-year period 1997-2006, the S&P 500 Index achieved an annualized return of 8.4%. If an investor missed just the top 20 days during this period, their return fell to -.4%.
  • Further, 21 of the best 40 days came during the bear market period 2000-2002.
  • Lastly, nearly three-fourths of the 40 best days came within two weeks following a worst market day.
A key investment decision for an investor should be to review their overall asset allocation. If the review, and investor risk tolerance, indicates additional equity exposure is appropriate, then maybe now is a good time to begin averaging into the market.

Source:
Market Timing Doesn't Work
Charles Schwab OnInvesting
By: Liz Ann Sonders
Fall 2007

Volatility and Complacency Make Strange Bedfellows
Charles Schwab OnInvesting
By: Liz Ann Sonders
Summer 2007
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