Very few people, even professionals, have heard of the Dalbar Study that originated in 1995. Its purpose is to determine the profitability of trading for the small investor of mutual funds. Their results are even worse than I thought.
The BuyNHolders will love the results as it "proves" that buying and holding is better than trying to switch to so-called "hot" funds. My readers know I think that mindless buy and hold is a guaranteed loser - and I can prove it.
During the greatest bull market of all time from 1984 to December 2002 the study came up with an annualized return of 2.57% compared to 12.22% for those who bought and held an S&P500 index fund. These dummies did not even keep up with inflation. The reason was they were switching from fund to fund after it had made its major move and they had no exit strategy if it did not make money.
I would guess it that they paid commissions which immediately put them in the hole. My recommendation is never to buy anything except a no-load mutual fund that does not have a redemption fee.
They also did not have a method to buy a fund with an excellent performance, but also had no plan as to when to sell. Every successful professional trader will tell you that you must have an exit plan as soon as any purchase is made. During any bull market there will be rotations among sectors. During periods of time, usually about 6 to 10 months, a particular sector will outperform all the others. For example, Asian funds might do well for 6 months and then fade, internet funds will do well for 10 months and then telecommunications will take the lead, and so forth.
A sector will do well and as more and more people find out about it the value of the stocks within that sector run to their valuation peak and go no further. That sector runs sideways or starts to fade.
Very few investors realize that mutual funds will only make money during a long term bull market. That bull ended in 2000. Going back in history as far as you want to you will find that every bull market has been followed by a bear market of equal length. During these bear periods there will be short-term opportunities to buy, but they must be held for only brief periods. The key to these is learning to time the market and pick the strongest sector funds. You can learn to do it on your own or subscribe to a proven timing service.
To me the Dalbar Study has proven that you (not your broker or financial planner) must learn market basics if you plan to profit from the stock market.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
http://www.mutualfundmagic.com; 1-888-345-7870
After finding the price of a particular stock, usually the... Read More
Wall Street's watchword has always been diversification, but what does... Read More
Most stock traders know that momentum trading can be a... Read More
I have watched my cat play with a bag of... Read More
Very few people, even professionals, have heard of the Dalbar... Read More
Invest in the stock market for the RIGHT reason, using... Read More
A colleague of mine just returned from a scuba diving... Read More
Investing in long-term financial vehicles give you the most gains... Read More
(1) CHK stock price $16.74, NAV $32.5CHK is my favorite... Read More
As a novice trader, you'll often feel the need to... Read More
You have a lock on your house. You have a... Read More
Hello Inflation, it has been awhile, I see you on... Read More
Its dinnertime and the phone rings. It's Joe Noname with... Read More
Well, not really. What I mean is I don't mind... Read More
The fight continues to rage among traders who use technical... Read More
Today we are inundated with tons of information about the... Read More
Recently I was invited to appear on a live CNNfn... Read More
Did you run out to buy that duct tape yet?... Read More
From the book 'The Stockopoly Plan' by the author Charles... Read More
It's about time someone spoke the truth concerning outsourcing. The... Read More
If you have talked to a stock broker or financial... Read More
Refuse is a serious issue in any society, about as... Read More
With the stock market stubbornly refusing to settle down and... Read More
I use the P/E ratio as a secondary indicator for... Read More
We all know that emotions control every decision that an... Read More
There are major differences between trading stocks and trading futures.... Read More
Reduce your investing and stock market risks by:Setting your sights... Read More
You remember (they show it on TV every year) the... Read More
Peter is a professional trader, Paul is not. Peter has... Read More
Stock trading remains a very competitive field and the stock... Read More
Today's society gives special recognition to alcoholics, sexaholics, binge-aholics, shopaholics,... Read More
If you're a normal human being, your need to feel... Read More
In his wonderful book, 'Multiple Streams of Income', best selling... Read More
Why? Because I am going to shatter your conventional wisdom... Read More
Someday you may want to retire and continue to live... Read More
Time to look back2004 is over, now we are in... Read More
We keep hearing about this bear market and that the... Read More
Are hedge funds a suitable investment for you? Hedge funds... Read More
People are always asking me when should I sell my... Read More
It is wonderful to be alive in the information age.... Read More
Is really not as important as to how you invest... Read More
How many times has this happened to you? You're at... Read More
How can you dispel an illusion unless you look directly... Read More
If you are a baby boomer, time is not on... Read More
The stock market often closes a week in the middle... Read More
Regardless of the fact that the world's stock markets have... Read More
Very few people, even professionals, have heard of the Dalbar... Read More
Everybody is riding the Wall Street Roller coaster. Even if... Read More
Profitable day traders recognize that momentum trading is among the... Read More
We are already in it, but you can't see it.... Read More
Stocks & Mutual Fund |