This table is
similar to the table in the Chapter 5 on A Tale of Two Plunges. The dates are
set up to be the first of the month to get the monthly data instead of daily
data from Yahoo!Finance. In addition, I add one more exit and reenter point for
the blur.
Detecting market plunges (Chapter 6)
detects the exit point and reentry points from 2000 to 9-2013 as follows.
Table:
Vital Dates
Market Plunge
|
Peak
|
Bottom
|
Indicator
Exit
|
Indicator
Reenter
|
2000
|
08/28/00
|
09/20/02
|
10/01/00
|
06/01/03
|
2007
|
10/12/07
|
03/06/09
|
02/01/08
|
09/01/09
|
08/01/11
|
11/01/11
|
As of 09/03/2013, my chart (simple to
get from Yahoo!Finance) still indicates to invest fully in the market from
09/03/2013 on. Run the simple chart once a month. When it indicates a potential
market plunge is closer, run the chart (Chapter 6) once a week.
It is based
on stock prices so it may not identify the peaks and bottoms precisely, but so
far it has never failed to avoid big losses and ensure big gains. Hope it will
give us enough time to act in the next market plunge as the last two.
Unbelievable
return with market timing
Calculate how
much you made if you followed the above exit points and reenter points from
2000 to today. I bet you will make a good fortune.
I calculated
the return of S&P 500 with and S&P 500 without market timing from
1-2000 to 9-2013 to test the effect of market timing. There are many
assumptions due to considering the compound effect for a fairer comparison. In
general, dividends are not considered.
I was shocked
by the incredible return by using simple market timing (exit and reenter the
market only 3 times from 2000 to 2013. Actually it is far better than 500% by buying contra ETFs in existing the stock market.
Summary info:
S&P 500
1-2000 to 9-2013
|
With Market Timing
|
Without Market Timing
|
Better
|
500%
|
|
Gain
|
1,000
|
167
|
Gain %
|
68%
|
11%
|
Annualized gained
|
5%
|
1%
|
Days
|
4,959
|
4,959
|
Calculations:
S & P 500
|
With Market Timing
|
Without Market Timing
|
1-2000
|
1,4691
|
1,4691
|
Exit 10/01/00
|
1,0412
|
1,041
|
Enter 06/01/00
|
1,041
|
9644
|
Exit 02/01/08
|
1,4893
|
1,3794
|
Enter 09/01/09
|
1489
|
1,0205
|
Exit 08/01/11
|
1,888
|
1,293
|
Enter 11/01/11
|
1,888
|
1,251
|
09/03/13
|
2,469
|
1.638
|
Gained
|
2,469 – 1,469=1,000
|
1,638-1,469=167
|
Gain %
|
1000/1469 = 68%
|
167/1469 = 11%
|
Annualized gained
|
68% * 365/4959=5%
|
11%*365/4959=1%
|
Better
|
(1,000-167)/167 =
500%
|
Portfolio
with Market Timing:
1
Both starts with S&P 500 of 1,469 on 1-3-2000.
2
10/01/00. The market timing portfolio exits the market and remains same value
of 1,041 until 6/1/00.
3
02/01/08. The market timing portfolio exits the market and remains same value
of 1,489 until 9/1/09.
1,489
is calculated as follows:
1,041 * (1 + Rate) = 1,041 * (1 +
1,379-964)/964) = 1,489
where S&P 500 is 964 on 6/1/00 and
1,379 on 2/1/08.
The other calculations are based on S&P 500 is 1,020 on
9/1/9, 1,293 on 8/1/11, 1,251 on 11/1/11 and 1,636 on 9/3/13.
Portfolio without Market Timing:
1
Both starts with S&P 500 of 1,469 on 1-3-2000. We could use the 9/3/13
S&P 500 value, but it will not account on some compounded interest
consideration.
4
S&P 500 is 964 in 6/1/00 and 1,379 on 2/1/08.
5
02/01/08. The portfolio value is calculated to be 1,020 as follows:
1,379 * (1 + Rate) = 1,379 * (1 + (1020-1379)/1379)
= 1,020
where S&P 500 is 1,379 on 2/1/08 and 1,020
on 9/1/09.
The other calculations are based on S&P 500 is 1,293 on
8/1/11, 1,251 on 11/1/11 and 1,636 on 9/3/13.
I cannot
believe the shocking return with market timing. I checked my calculation and
there was nothing wrong but do not hold me on this. The compound rate of return
not considered in all periods should be minor. If you have time, send me your
e-mail address to pow_tony@yahoo.com, so I can send you the spreadsheet to
check any error.
Even if I made
a mistake somehow and got 100% instead of 500%, it still doubles the return
without market timing! Ask any fund manager what it means to his or her fund
performance and his / her career.
The values
of S&P 500 are obtained from Yahoo!Finance. The entry and exit points are
obtained from my simple chart from Yahoo!Finance described in Chapter 4-6 and
subject to my interpretation.
My e-book Debunk the Myths of Investing could save you a lot of money in investing. The above is one chapter out of 133 and some important chapters will not be included in the blog.
http://ebtonypow.blogspot.com/2012/12/special-debunk-myths-of-buffett.html
Sample portfolio for the book.
http://stockportfolios.blogspot.com/2013/03/welcome.html
(c) 2013 Tony Pow
Disclaimer. I'm not responsible for your actions in your investment. Treat this as educational information and past performance does not guarantee future performance.
-------
My e-book Debunk the Myths of Investing could save you a lot of money in investing. The above is one chapter out of 133 and some important chapters will not be included in the blog.
http://ebtonypow.blogspot.com/2012/12/special-debunk-myths-of-buffett.html
Sample portfolio for the book.
http://stockportfolios.blogspot.com/2013/03/welcome.html
(c) 2013 Tony Pow
Disclaimer. I'm not responsible for your actions in your investment. Treat this as educational information and past performance does not guarantee future performance.
