Sunday, November 23, 2008

Do you have 26 years?

click to enlarge

Buy-and-hold is what Wall Street promotes to the Sheeple. Buy-and-hold has been a good way to get fleeced this year. The fallacy of B&H should now be clear.

The above chart shows the crash of 1929 and the bear market that followed. If you had bought the Dow at the top of the market in 1929 and held onto your investment, you would have recovered your original capital 25 years later, not accounting for inflation.

A better way is to allocate your capital in accordance with prevailing market conditions. For example, the SGM portfolio's timing system generated a SELL signal on 9/12/08, neatly avoiding the OCT/NOV plunge. As documented here in the live test, the SGM portfolio has been net-50%-short the market and is UP 31% over the period since 9/12/08.

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