In the world of finance, a common belief persists that market timing is a fruitless endeavor. This view, widely propagated by mainstream financial media, rests on the premise that only a handful of large daily returns drive the bulk of stock market performance.
However, let's take a step back and look at this from a different angle. It's not just about the frequency of these returns, but their timing – and that's where the plot thickens.
Quant analysts have pointed out a crucial detail: a significant portion of these hefty returns occur during reflex rallies in major market corrections.
What does this mean for the average Joe and Jane?
Particularly for those nearing retirement, it suggests that bailing out at the "uncle point" – that moment of maximum financial stress – might lead to missing out on substantial gains.
Here's where numbers speak louder than words.
Let’s take the S&P 500 as our guinea pig. Statistics show that most high daily returns (think north of 3%, 5%, and even 7%) predominantly happen when the market is in a deep dive, over 25% down from its peak. For instance, out of 23 instances of returns greater than 5%, a whopping 19 occurred during such downturns.
This data flips the script on passive investing.
The hidden paradox here is that to reel in those big fish – the large total returns often flaunted by financial media and passive indexing strategies – investors need to weather the storm of significant drawdowns.
"But wait," you might say, "isn’t market timing frowned upon by academics and the passive indexing crowd?" Sure, it's been under the gun, but let’s not throw the baby out with the bathwater.
Consider this simple, yet effective strategy: stay invested in the market as long as the S&P 500 is above its 12-month moving average. Bail out when it dips below. This approach might not be the Midas touch, but it has dodged a few financial bullets, reducing maximum drawdown and sprucing up the risk-adjusted returns.
Of course, there’s more than one way to skin a cat. From using moving averages to trend-following CTA strategies, the market timing toolbox is brimming with options.
These strategies are not just about playing it safe; they’re about smartly navigating the choppy waters of the stock market.
While the mainstream narrative might have you believe that market timing is a wild goose chase, a closer examination paired with strategic execution suggests otherwise.
It’s all about striking the right balance between risk and return, a harmony that resonates with the tunes of personal financial goals and risk appetites.
If you liked this content, you will love our Report.👇
Wall Street Insider Report
Demystify the MARKET CYCLES investing SMARTER in Wall Street
Theory + Action: Learn & Replicate a High Performance + Low Maintenance + Long-Term Portfolio
Join our community of Global Investors in 20 countries and Really Master the Market Cycle Investing
Disclaimer:
The publisher does not guarantee the accuracy or completeness of the information provided in this page.
All statements and expressions herein are the sole opinion of the author.
The Zurique Capital is a publisher of financial information, not an investment advisor.
We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.
THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME.
THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION.
INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.
No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.
Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable.
They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein.
The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.
The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities).
To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.
Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.
By using the Site or any affiliated social media account, you are indicating your consent and agreement to this disclaimer and our terms of use.
Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.
For Full Terms of Use Click HERE. For the Privacy Policy Click HERE.
wallstreetinsiderreport.com (“Zurique Capital”) is a website owned and operated by Substack.
By accessing this website or any page thereof, you agree to be bound by the Terms of Use and Privacy Policy, in effect at the time you access this website or any page thereof.
The Terms of Use and Privacy Policy may be amended from time to time. Nothing on this website shall constitute an offer to sell, or a solicitation of an offer to buy or subscribe for, any securities to any person in any jurisdiction where such an offer or solicitation is against the law or to anyone to whom it is unlawful to make such offer or solicitation.
“Zurique Capital” is not an underwriter, broker-dealer, Title III crowdfunding portal or a valuation service and does not engage in any activities requiring any such registration.
“Zurique Capital” does not provide advice on investments or structure transactions.
Offerings made under Regulation A under the U.S. Securities Act of 1933, as amended (the "Securities Act") are available to U.S. investors who are “accredited investors” as defined by Rule 501 of Regulation D under the Securities Act well as non-accredited investors, who are subject to certain investment limitations as set forth in Regulation A under the Securities Act.
In order to invest in Regulation A offerings, investors may be asked to fill out a certification and provide necessary documentation as proof of your income and/or net worth to verify that you are qualified to invest in offerings posted on this website.
All securities listed on this site are being offered by, and all information included on this site is the responsibility of, the applicable issuer of such securities.
“Zurique Capital” does not verify the adequacy, accuracy or completeness of any information.
Neither “Zurique Capital” nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy, valuations of securities or completeness of any information on this site or the use of information on this site.
Neither “Zurique Capital” nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising from any error or incompleteness of fact, or lack of care in the preparation of, any of the materials posted on this website.
Investing in securities, especially those issued by start-up companies, involves substantial risk. investors should be able to bear the loss of their entire investment and should make their own determination of whether or not to make any investment based on their own independent evaluation and analysis.
