7 ms·

And if you avoided the worst 10 days, your earnings double. If you avoided 20 worst days, your earning doubled again. What is the point of such trivia? That mo

And if you avoided the worst 10 days, your earnings double. If you avoided 20 worst days, your earning doubled again. What is the point of such trivia? That most of the profit or loss happens during the days of high volatility?

ericmay 5y ago
> What is the point of such trivia? That most of the profit or loss happens during the days of high volatility? Simply that you shouldn't try and time the market, but continue to "buy and hold". The likelihood of picking these exact 10 or 20 days is near 0, so it's an irrational thing to do.
- akomtu 5y ago
  I'd politely disagree. The massive fall and recovery around March 2020 was easy to predict, so I did and made a handsome amount of money. I mean, if a small asteroid fell on an important trade route or if another serious pandemic began, would you seriously suggest to just hold the stocks?
  - ericmay 5y ago
    I did too, but I think that's besides the point.
  - egman_ekki 5y ago
    Curious to learn more, if you don't mind sharing. I wrongly assumed things would get quite a bit worse than they were at the point when sp500 turned back up. How did you know that was the bottom? Fundamental analysis? Or were you buying continuously on the way down?
    - ericmay 5y ago
      Well, I can't speak for the person you are replying to, but think about a company like this (in general) - has something changed such that the new price (usually a drop) makes sense? Take Amazon - down 15% or something. The virus is there yet, but is Amazon really worth 15% less? Won't people shop online? There's no way Amazon is going bankrupt, and there's no way that the U.S. would let companies like this fail over the virus, so is it really worth 15% less? You don't have to time the exact moment of the bottom, you just find it once you see double digit loses in extremely good and valuable companies who are pulled down with the market. Airlines? Yea probably wouldn't have been an ideal buy, though if you waited long enough you've rebounded on them. But it seemed pretty safe to buy the big tech companies, Berkshire, etc. when they were experiencing double-digit percentage market losses over a likely temporary phenomenon. Now, was it possible that things would have gotten much, much worse? Yea. So OP and myself could have been wrong, but instances like this are a bit of informed gambling, if you will.
PeterWhittaker 5y ago
This "trivia" points out the flaw in the "long term average" argument: The stock market is occasionally so volatile that 40 days out of 34,675 have an inordinate effect on returns over those 34,675 days. Over 95 years of trading, 0.12% of days account for far, far, far, far more than 0.12% of market impacts.
- dasil003 5y ago
  Yeah so what are you going to do about it?
  - pc86 5y ago
    What kind of argumentative nonsense comment is this?
    - randoramax 5y ago
      I think it's a legitimate question: we all have a large chunk of savings stuck in this game because of perverse incentives set by corrupt/inept US gov. Now what?
    - dasil003 5y ago
      The point is that of course there are the outlier days that disproportionately affect gains/losses, that doesn't invalidate the long-term average argument though unless you have some way of identifying those periods in advance. If you could do that then you A) would not tell anyone until B) the SEC came knocking at your door to explain how you turned $1k into $1B over a very short time span.
    - hattmall 5y ago
      Hedge with options. You can even out the highs and lows, make your returns predictable with in a tight window and act accordingly.
grumpwagon 5y ago
The point of the trivia is arguing against trying to time the market. Lots of people predict crashes are coming, so shift money from equities to cash or bonds. Unless you can time it perfectly (you can't), it is better to hold because you don't know when the best or worst days are.
- mertd 5y ago
  But the analysis assumes you timed the market "perfectly" and sat out only on the 10 best days.
- tut-urut-utut 5y ago
  I agree that timing the market usually doesn't work. But it doesn't work in both ways. You are equally likely to miss or hit both good and bad days, with the same or similar impact on total return.
  - ceejayoz 5y ago
    The good and bad days are not equally likely to be equally good/bad, though. Long-term, the market tends to rise; the good days will outnumber the bad in either quantity or quality.
  - gimmeThaBeet 5y ago
    The author's colleague had a blog post on the topic, reasoning that missing either the best or worst was not a particularly interesting "what-if" since the best and worst days are both associated with the same bouts of higher volatility. He used the 200 day moving average to try and model the effect of 'missing' both. It honestly didn't turn out so bad, but one takeaway is that backtesting (aside from not being a necessarily great projection) does not model personalities. https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-days-miss-the-best-days/ https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-...
  - charwalker 5y ago
    If one is equally likely to miss both good and bad days, but overall the market is up 10%+ in a year (repeated over decades), then money left in the market will double every 7 years or so (Rule of 72 [1]). In that way it is almost always preferable to invest and hold in index funds. The S&P 500 has returned about 13.6% return per year from 2010-2020 [2], or doubling your money about every 5.5 years. If that rate continues or increases then of course it makes no sense to try and time the good or bad days. Of course, some will argue that a pure index fund market won't be priced correctly as it is active/day traders who continually buy and sell to set a proper market rate. If everyone buys and holds like Bitcoin then there is no true reflection of the companies value in the stock. Those that would go under otherwise may be buoyed or bought out just for their stock value. There are many opinion articles out there on the topic, but so far it hasn't been observed at scale (I think). [1] https://en.wikipedia.org/wiki/Rule_of_72 https://en.wikipedia.org/wiki/Rule_of_72 [2] https://www.businessinsider.com/personal-finance/average-stock-market-return https://www.businessinsider.com/personal-finance/average-sto...
nunez 5y ago
the point is to remind folks that if you want to invest in the market safely, use index funds...otherwise, enjoy gambling
TuringNYC 5y ago
>> And if you avoided the worst 10 days, your earnings double. If you avoided 20 worst days, your earning doubled again. >> What is the point of such trivia? The point is -- it is hard to avoid/miss the 10 worst days since you dont know which ones they will be. It is easy to capture the 10 best days because the easiest thing to do is be invested all the time.
- j7ake 5y ago
  Isn’t it easy to miss the bad days because after it happens, you can buy stocks?
  - qotgalaxy 5y ago
    Maybe the next ten days after that are the ten worst days.
baby 5y ago
I understood it as: HODL
lmilcin 5y ago
Except it is much easier to participate in best days than avoid worst ones. Participating in best days requires you to just have your money invested all the time. If you know how to avoid worst ones, let me know. We are managing risk for one of the biggest banks in the world and would like to buy this intel for a bunch of billions of dollars.

ericmay 5y ago

> What is the point of such trivia? That most of the profit or loss happens during the days of high volatility? Simply that you shouldn't try and time the market, but continue to "buy and hold". The likelihood of picking these exact 10 or 20 days is near 0, so it's an irrational thing to do.

akomtu 5y ago
I'd politely disagree. The massive fall and recovery around March 2020 was easy to predict, so I did and made a handsome amount of money. I mean, if a small asteroid fell on an important trade route or if another serious pandemic began, would you seriously suggest to just hold the stocks?
- ericmay 5y ago
  I did too, but I think that's besides the point.
- egman_ekki 5y ago
  Curious to learn more, if you don't mind sharing. I wrongly assumed things would get quite a bit worse than they were at the point when sp500 turned back up. How did you know that was the bottom? Fundamental analysis? Or were you buying continuously on the way down?
  - ericmay 5y ago
    Well, I can't speak for the person you are replying to, but think about a company like this (in general) - has something changed such that the new price (usually a drop) makes sense? Take Amazon - down 15% or something. The virus is there yet, but is Amazon really worth 15% less? Won't people shop online? There's no way Amazon is going bankrupt, and there's no way that the U.S. would let companies like this fail over the virus, so is it really worth 15% less? You don't have to time the exact moment of the bottom, you just find it once you see double digit loses in extremely good and valuable companies who are pulled down with the market. Airlines? Yea probably wouldn't have been an ideal buy, though if you waited long enough you've rebounded on them. But it seemed pretty safe to buy the big tech companies, Berkshire, etc. when they were experiencing double-digit percentage market losses over a likely temporary phenomenon. Now, was it possible that things would have gotten much, much worse? Yea. So OP and myself could have been wrong, but instances like this are a bit of informed gambling, if you will.

PeterWhittaker 5y ago

This "trivia" points out the flaw in the "long term average" argument: The stock market is occasionally so volatile that 40 days out of 34,675 have an inordinate effect on returns over those 34,675 days. Over 95 years of trading, 0.12% of days account for far, far, far, far more than 0.12% of market impacts.

dasil003 5y ago
Yeah so what are you going to do about it?
- pc86 5y ago
  What kind of argumentative nonsense comment is this?
  - randoramax 5y ago
    I think it's a legitimate question: we all have a large chunk of savings stuck in this game because of perverse incentives set by corrupt/inept US gov. Now what?
  - dasil003 5y ago
    The point is that of course there are the outlier days that disproportionately affect gains/losses, that doesn't invalidate the long-term average argument though unless you have some way of identifying those periods in advance. If you could do that then you A) would not tell anyone until B) the SEC came knocking at your door to explain how you turned $1k into $1B over a very short time span.
  - hattmall 5y ago
    Hedge with options. You can even out the highs and lows, make your returns predictable with in a tight window and act accordingly.

grumpwagon 5y ago

The point of the trivia is arguing against trying to time the market. Lots of people predict crashes are coming, so shift money from equities to cash or bonds. Unless you can time it perfectly (you can't), it is better to hold because you don't know when the best or worst days are.

mertd 5y ago
But the analysis assumes you timed the market "perfectly" and sat out only on the 10 best days.
tut-urut-utut 5y ago
I agree that timing the market usually doesn't work. But it doesn't work in both ways. You are equally likely to miss or hit both good and bad days, with the same or similar impact on total return.
- ceejayoz 5y ago
  The good and bad days are not equally likely to be equally good/bad, though. Long-term, the market tends to rise; the good days will outnumber the bad in either quantity or quality.
- gimmeThaBeet 5y ago
  The author's colleague had a blog post on the topic, reasoning that missing either the best or worst was not a particularly interesting "what-if" since the best and worst days are both associated with the same bouts of higher volatility. He used the 200 day moving average to try and model the effect of 'missing' both. It honestly didn't turn out so bad, but one takeaway is that backtesting (aside from not being a necessarily great projection) does not model personalities. https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-days-miss-the-best-days/ https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-...
- charwalker 5y ago
  If one is equally likely to miss both good and bad days, but overall the market is up 10%+ in a year (repeated over decades), then money left in the market will double every 7 years or so (Rule of 72 [1]). In that way it is almost always preferable to invest and hold in index funds. The S&P 500 has returned about 13.6% return per year from 2010-2020 [2], or doubling your money about every 5.5 years. If that rate continues or increases then of course it makes no sense to try and time the good or bad days. Of course, some will argue that a pure index fund market won't be priced correctly as it is active/day traders who continually buy and sell to set a proper market rate. If everyone buys and holds like Bitcoin then there is no true reflection of the companies value in the stock. Those that would go under otherwise may be buoyed or bought out just for their stock value. There are many opinion articles out there on the topic, but so far it hasn't been observed at scale (I think). [1] https://en.wikipedia.org/wiki/Rule_of_72 https://en.wikipedia.org/wiki/Rule_of_72 [2] https://www.businessinsider.com/personal-finance/average-stock-market-return https://www.businessinsider.com/personal-finance/average-sto...

nunez 5y ago

the point is to remind folks that if you want to invest in the market safely, use index funds...otherwise, enjoy gambling

TuringNYC 5y ago

>> And if you avoided the worst 10 days, your earnings double. If you avoided 20 worst days, your earning doubled again. >> What is the point of such trivia? The point is -- it is hard to avoid/miss the 10 worst days since you dont know which ones they will be. It is easy to capture the 10 best days because the easiest thing to do is be invested all the time.

j7ake 5y ago
Isn’t it easy to miss the bad days because after it happens, you can buy stocks?
- qotgalaxy 5y ago
  Maybe the next ten days after that are the ten worst days.

baby 5y ago

I understood it as: HODL

lmilcin 5y ago

Except it is much easier to participate in best days than avoid worst ones. Participating in best days requires you to just have your money invested all the time. If you know how to avoid worst ones, let me know. We are managing risk for one of the biggest banks in the world and would like to buy this intel for a bunch of billions of dollars.