Hot stock timing strategy
Finance → Stocks, Bond & Forex
- Author Jon Provencher
- Published January 20, 2008
- Word count 576
You've probably heard the saying "Sell in May and Go Away" but didn't do anything about it. Research suggests you should think again. The Buy and Hold approach to your bull market stock picks or following stock option subscription service recommendations may not be enough to ensure profitability for your portfolio.
Market timing can greatly improve the profitability of your portfolio. I'm sure your parents have told you how their bull market stock picks have soared since they first acquired them. Many researchers and investors have discovered that over the long term, investing in stocks is one of the most favorable strategies for accumulating wealth. However, it doesn't come without sleep-less nights and some significant set-backs. If you had bought the S&P500 index at the start of 1995 and kept it until the end of 2006 you would have made 119%. Perhaps you could have done even better with your own bull market stock picks or stock option subscription service recommendations. Considering that the S&P500 is still trading lower than it's high in 2000 a lot of patience can be required. A market timing tool could help you determine when to get in and out of the market.
Recently, while hunting for some bull market stock picks and stock option subscription service recommendations I came across a market timing model, based on that saying "Sell in May and Go Away" and I was intrigued. When I had a look at it I found some really intriguing results. The results I found showed that for the last 56 years, some months of the year have been consistently positive and some have been consistently negative. Conveniently, the most profitable months form a group together, ideal to use as a market timing model.
With this knowledge we can deduce a simple market timing method based on 56 years of historical data. (significantly more back-testing than any stock option subscription service service out there)
The idea would be to buy the market at the start of our run of historically proven 'good' months and sell at the end. This simple strategy would have gained 126%, a modest 7% more than simply buying and holding. It also would have dodged most of the large declines experienced by the market, producing a much smoother curve of returns. Of course, beating the market by 7% doesn't sound that exciting. The real surprise comes when we see that our re-invested account would have returned 20% more than the market, simply by avoiding some of those large market drops and providing us with a more consistent rate of return.
So, not only have we performed better than the index by 20% by following the 'good' months, we have accomplished it in only 7 months. The residual 5 months of the year %our money can be safely stashed aside%. At the very least for those 5 months that are historically 'bad' we could be a little more careful with our bull market stock picks or stock option subscription service recommendations.
An idea to consider then, when our first 'good' month comes around and it is time to invest in the market, could be to find some bull market stock picks recommendations or do some internet research on stock option subscription service to gives us some tips to make even more from our 7 months in the market.
Next time you are looking at your bull market stock picks, or pondering subscribing to a stock option subscription service service consider this simple market timing model to boost your portfolio's return.
Jon is the owner of 7months2profit, a market timing report, based on the most profitable months observed in the stock market. Is method has returned an average of +40% each year since 1995.
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