| Very few people, even professionals, have heard | | | | made. During any bull market there will be |
| of the Dalbar Study that originated in 1995. Its | | | | rotations among sectors. During periods of time, |
| purpose is to determine the profitability of trading | | | | usually about 6 to 10 months, a particular sector |
| for the small investor of mutual funds. Their | | | | will outperform all the others. For example, Asian |
| results are even worse than I thought. | | | | funds might do well for 6 months and then fade, |
| The BuyNHolders will love the results as it | | | | internet funds will do well for 10 months and then |
| "proves" that buying and holding is better than | | | | telecommunications will take the lead, and so |
| trying to switch to so-called "hot" funds. My | | | | forth. |
| readers know I think that mindless buy and hold is | | | | A sector will do well and as more and more |
| a guaranteed loser - and I can prove it. | | | | people find out about it the value of the stocks |
| During the greatest bull market of all time from | | | | within that sector run to their valuation peak and |
| 1984 to December 2002 the study came up with | | | | go no further. That sector runs sideways or |
| an annualized return of 2.57% compared to | | | | starts to fade. |
| 12.22% for those who bought and held an | | | | Very few investors realize that mutual funds will |
| S&P500 index fund. These dummies did not | | | | only make money during a long term bull market. |
| even keep up with inflation. The reason was they | | | | That bull ended in 2000. Going back in history as |
| were switching from fund to fund after it had | | | | far as you want to you will find that every bull |
| made its major move and they had no exit | | | | market has been followed by a bear market of |
| strategy if it did not make money. | | | | equal length. During these bear periods there will |
| I would guess it that they paid commissions which | | | | be short-term opportunities to buy, but they |
| immediately put them in the hole. My | | | | must be held for only brief periods. The key to |
| recommendation is never to buy anything except | | | | these is learning to time the market and pick the |
| a no-load mutual fund that does not have a | | | | strongest sector funds. You can learn to do it on |
| redemption fee. | | | | your own or subscribe to a proven timing service. |
| They also did not have a method to buy a fund | | | | To me the Dalbar Study has proven that you |
| with an excellent performance, but also had no | | | | (not your broker or financial planner) must learn |
| plan as to when to sell. Every successful | | | | market basics if you plan to profit from the stock |
| professional trader will tell you that you must | | | | market. |
| have an exit plan as soon as any purchase is | | | | |