by | Nov 1, 2002 | Archives

A reader recently scolded me and showed me that I didn't know a darn thing. See what I mean below and then learn one of your stockbroker's dirtiest little tricks!

My recent message https://www.garyascott.com/market/670/ asked whether the stock market was reaching its bottom met with this blast from a reader who obviously follows the market very carefully.

He wrote: “Gary what in the heck do you mean. The market has already risen over 1,000 points! Of course it has reached its low and is going back up.” Yet another reader wrote almost at the same time: “I've been waiting for several years for the bull market to end so I could SHORT the stock market….and now is the time. The market goes down faster than it goes up. I am using either spreads or outrights (buying puts or selling calls) to invest in the bull being handed out by the stock market pundits and CNBC. And I'm loving every minute of it, going against Wall St. and the 'chattering heads' on TV.”

These notes reminded me that I had missed making an incredibly important point. The fact is that market timers almost always lose. You cannot predict when the market is going to rise and fall and yesterday's performance does not mean diddle when it comes to what will happen tomorrow. One great way I believe to invest is to follow a PIEC investing plan

Do not invest because you think the market is up or down. The message mentioned above (https://www.garyascott.com/market/670/ shows how the market is likely to move sideways over the next 10 or so years. So we must be warned if the market keeps rising, this does not mean that we are in a sustained bull market. Just when investing looks good the market is likely to once again collapse.

Here is an even greater warning. Ask any broker why investing in the stock market for the long term is better than bonds and he or she will show how the return in stocks is so much better than in bonds. In fact they might even pull out a chart from Ibbotson (one of the market's main record keepers) that shows how A DOLLAR INVESTED IN COMMON SHARES IN 1926 ROSE TO BE WORTH $800 BY 1993. Then they will compare this with the fact that the same one dollar invested in U.S. T bonds would have grown to only $11.70. This is a compelling difference. Right? Remember the saying that there are three types of lies. Lies, damn lies and statistics.

Here is the catch in this common stock market statistic, which you can see in the attached Ibbotson chart. If that dollar invested in common stocks from 1926 to 1993 (812 months) missed just the 30 best months of that entire period it would be worth $11.40 cents instead of $800. Just missing those few months makes the investment yield less than U.S. Treasury bonds.

The morale. Do not try to invest based on market timing! If you have nothing better to gauge whether or not to lay out your hard earned bucks than the market might be ready to rise again, forget it. Start your own business instead! (see yesterday's message why).

We live in a holistic universe and our consciousness can create what we are and how we live or we can let others create it for us. If you follow a PIEC investing plan you take charge of your life, your investing and put your investments in perspective with your life. Try anything else (like market timing) and you put your fate in the hands of others (and those hands have been proven recently to be very uncaring).

Until next message, may all your investing be yours and good! Gary

P.S. Economics are at such a vital stage that I have added an extra day on this subject at our November Orlando course.