When “Knowing” May Be Just Guessing And Hoping…

By Mark Phillips

The below chart illustrates why we loath to guess what the market will do tomorrow, next week, or next month (and even a bit flummoxed over what the next year may bring).

The corollary to the below graphic is that we can account for all of the positive net return in the S&P 500 index over this  ~6,000 day period (from Jan. 1, 1993 to Dec. 31, 2013) with what occurred on the best 35 days of the market. Take away these 35 days and the S&P 500 index had no net total return. This is roughly 2 days per year on average.

When do these days most often occur?  During periods of heightened volatility, often directly on the heels of a drawdown, so often right around the time that many have fled the stock markets.

Of course we are not 100% invested in the S&P 500 or any proxy for it. A diversified portfolio likely includes stock exposure to this and other equity categories, as well as bond and alternative (hard assets and hedging strategy) categories. Nonetheless, this type of attribution to total return is true of most all equity categories.

 














Now if only there were a reliable tool to pre determine what will be those most important 35 days over the next 20 years….Many have tried, billions have been spent on the effort, none have succeeded.

For us, staying fully engaged is part of the strategy for your success.

Read the full article at: Business Insider

All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results.