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Investment Research - The Dalbar Study
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
al@mutualfundstrategy.com; 1-888-345-7870
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Searching for Mortgage Rates-How to Utilize the Internet
Anyone who has every had to look for a mortgage will tell you how important it is to check various mortgage rates to ensure that you are getting the best interest rate and the best mortgage for you and your finances. In the past, searching for mortgage rates meant calling lenders and finding out what their rates were, as well as their terms. This was a long process that many people balked at - and many didn't do at all because of the amount of time that it took. However, now you're in luck. Finding mortgage rates for comparison has never been easier thanks to the Internet.
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Cemetery Plots As A Practical Real Estate Investment
Many years ago, in one of his many flashes of investment brilliance, my father decided to purchase four cemetery plots; one for each of the members of my immediate family. Many years later I decided to check on the value of the two remaining plots and I was very surprised at how much they had increased value.
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Good Credit is King, When Qualifying for Mortgage Programs
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PENSCO Trust Hosts Educational Events on Self-Directed IRAs, Free to Financial Advisors, Attorneys, CPAs, Real Estate & Mortgage Professionals
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Award Winning Ford Mondeo Tops the Charts With ACF Car Finance Customers
ACF Car Finance have announced increased sales of the Ford Mondeo following a host of high profile industry awards.
Private Mortgage Insurance Basics
Will you be asked to pay Private Mortgage Insurance, or PMI?
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Understanding Debt Consolidation Loan And Mortgage Refinance Options
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Home loan Strategy ? The ?5 by 5? strategy (renew 5 times a 5 years fixed mortgage pr?t hypothecaire)
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More on the Property Investment Market in Dubai
Investing in property in Dubai is the smart and obvious choice, especially following on from the passing of Law Number 7 that allows for the ?foreign freehold ownership of property? in certain designated areas in Dubai
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Learn Well Graphics Releases The Ciphers Series -- Graphic Booklets That Help Students Learn About Math and Finance
New graphic booklets use adventure and mystery to promote financial literacy and math, while helping students improve their reading skills at the same time.
