The sequence of investment returnrns can impact lifestyles of long-term investors and retirees. It is equally important during shorter timeframes.
If you need proof, just look at the stock market last year.
With the slew of negative headwinds the U.S. and global economies faced at the beginning of this year, it was understandable if investors didn’t jump in head first on January 1, 2012.
Yet, those who ponied up on the first trading day of that year got immediately positive feedback. The S&P 500 was up 12.3% from January 1 to April 1.
Now, assuming these investors were the buy-and-hold type, that start to 2012 would have given them confidence that the year was going to be good to stocks. But their hopes were quickly dashed…
From April 1 to June 1, the S&P 500 lost 11%, erasing nearly all of the year-to-date gains that the early birds had been enjoying. The result? Investors could have bought the S&P 500 at the exact same price on June 4 as they did on January 1. See here on a chart of the S&P 500:
Of course everyone who bought in January felt like a rock star through April, then bit off all their fingernrnails from April to June. If they caved under the pressure at that point and sold out, they would have lost out on the year’s second rally, which drove the S&P 500 from 1,270 to 1,470, for a nice 16% gain.
Then came the year’s second pullback. Stocks gave up about half of the aforementioned 16% gain in just two short months.
And that’s usually how it goes… many months’ worth of gains can evaporate in much shorter time.
This up and down (and up and down, again) nature of the markets in 2012 made it difficult for investors, to say the least. The question now is, should investors trust the economy – which is still faltering – or the stock market – which is showing remarkable resilience?
We ask: why choose?
I’m a short- to medium-term swing trader. And, I rely on statistically-tested research to find high probability trading opportunities over a defined timeframe of two to three months. I stick to that specific period because the nine market sectors I study shift in and out of favor in regular cycles that are… you guessed it… two to three months long.
All of which makes me the man YOU need by your investment side.
If last year’s market provided enough frustration to make you consider throwing in the towel… I suggest you consider a different approach.
That is, give my new trading service, Cycle 9 Alert, a look. We launch tomorrow…