| If your plan is "throw my money into a pit" that is not a good strategy, even if you stick to it. So no, we would not agree. You ignore Nejat Seyhun's 1994 paper "Stock Market Extremes and Portfolio Performance" [0] which says: > For the 1963-1993 time frame, the findings were similar. The index gained at an average annual rate of 11.83%, for a cumulative return on $1.00 of $23.30 over 31 years. If the best 90 trading days, or 1.2% of the 7,802 trading days, are set aside, the annual return tumbles to 3.28% and the cumulative gain falls to $1.10. And from ARWDWS [1]: > The past history of stock prices cannot be used to predict the future in any meaningful way. Technical strategies are usually amusing, often comforting, but of no real value. Further: > Using technical analysis for market timing is especially dangerous. Because there is a long-term uptrend in the stock market, it can be very risky to be in cash. An investor who frequently caries a large cash position to avoid periods of market decline is very likely to be out of the market during some periods where it rallies smartly. [0] https://www.stayingrich.net/wp-content/uploads/2016/05/Towne... [1] https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/03933... |
Thank for for that paper, I'll give it a read.
The next line in Seyhun's paper is more interesting to me and the focus of my research and strategy:
> If the 10 worst days are eliminated, the annual return jumps to 14.06%, and the cumulative return increases to $44.80. With the 90 worst days out, the annual return rises to 21.72% and the cumulative gain to $325.40.
I believe this paper describes a strategy that accomplishes that goal relatively well: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4346906