The previous chart reveals the long standing secular moves of the markets; What’s an investor to do during one of the long periods of weakness?
One answer is to learn to be more nimble, and trade the cyclical markets.
Dow Jones Industrial Average, 1966 – 1982
click for larger chart
data for chart courtesy of Bloomberg
During this period, we see rallies as much as strong as 75% and sell offs as brutal as 45%.
This is not a goo9d environment for the Buy and Hold approach. It works well ONLY during secular — not cyclical — Bull phases. You can hold stock for decades if you buy into the early stages of a secular period. Think of the years right after 1935, 1946 or 1982. But if you by at the wrong end of a secular run — 1929, 1966, or 2000 — and it took many years to get back to breakeven; and thats before inflation:
1929 purchase breakeven = 1954 (25 years)
1966 purchase breakeven = 1982 (16 years)
2000>(breakeven = ?)
History suggests that a top ticking Nasdaq holder will not return to breakeven — 5100 — until between 2015-25
Investing —More of a Challenge