There are many investors and websites with trading systems designed to advocate that you can beat the market by timing your stock purchases and exits. That is the theory with day traders. They feel that by looking at the historical movements of a stock and where certain technical indicators are, the entry and exit points will be identified. To a small extent, this is possible but not for the long-term growth expectations of making a profit on stock investments.

The thing is that common stocks have volatile returns. That is why they have potential for better returns. Historically investors have suffered negative annual returns 27% of the time. If someone had a crystal ball and could without error predict the turnings of the stock market, they would be rich from their investments and the selling of advice. The truth is that no one has a crystal ball.

Roger C Gibson in his book “Asset Allocation” gives an example. Say in 1925 you found a person who had a crystal ball, so to speak. That is they could predict accurately what the stock market was going to do the next year. You follow their advice and at the end of 1926 your $1.00 investment grew to $1.12. Year after year you follow this market timers advice and never have any down y ears. By the end of 1998 your investment would be worth over $20 million instead of the actual best –performing investment alternative. Small company stocks during the same period had an ending value of $5117.

With this example, Mr. Gibson tried to point out that no one is able to predict accurately every Bull or Bear market. A great investment axiom is “hind sight is 20/20”. Meaning that it is easy to predict what the market or a particular stock is going to do after the fact. It is the before the fact decisions that are difficult.

Trinity Investment Management Corporation analyzed the nine peak to peak cycles that have occurred since 1946. They found that there were about 1.7 times as many up months as down months during this period. The average bull markets is up 104.8 percent versus the average bear market of -28 percent. Bull markets lasted nearly three times as long as bear markets and the shocker is that even in bear markets, there were on average about 3 – 4 up months out of 10 months.

A study by Robert H Jeffrey concluded “ No one can predict the market’s ups and downs over a long period, and the risks of trying outweigh the rewards”. He went on and commented “The rationale for being a full-time equity investor is not that there are more positive real return periods than negative ones in most time frames, but rather that most of the “positive action” is compressed into just a few periods, which tend to follow particularly adverse times for stocks”.

In another study Jess S Chua and Richard S. Woodward concluded “Overall, the results show that it is more important to correctly forecast bull markets than bear markets. If the investor has only a 50 percent chance of correctly forecasting bull markets, then he should not practice market timing at all. His average return will be less than that of a buy-and-hold strategy even if he can forecast bear markets perfectly”.

William F. Sharpe concluded that “a manager who attempts to time the market must be right roughly three times out of four, merely to match the overall performance of those competitors who don’t. If he is right less often his relative performance will be inferior”.

The conclusion then is the long term investor, which is what we should all be, should enter for the long run. Establish a good strong diversified portfolio and stick with it through the ups and downs.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.

As an investor it is important to learn where to obtain both up to date stock market statistics and historical statistics. The historical data is important since history does seem to repeat itself. Some have said that the current 2008 -2009 economy masks somewhat the situation before the great depression in 1929. It is important to learn how it is similar and how it is different to determine the investing strategy. The current stock market statistics are important to monitor the daily movement of the stock market, why it is moving up or down and what factors may influence it. The stock market hates uncertainty. Anything that concerns investors as a whole can cause a movement in the stock market.

Another thing that stock market analysis will accomplish is the trends of botha a bull market and bear market. For example, since 1950 the average bear market has lasted 13 months. We are in the 18th month of the current bear market. Also when the S & P 500 is trading below its fair value and inflation is below its long term historical average of 4.2% (conditions which exist today), the return on stocks is positive more than 80% of the time. These statistics are important to determine if it safe to enter back into the stock market as an investor.

The following site: http://news.moneycentral.msn.com/briefing/StockTicker.aspx, is a site which lists the news of the day, what happened on the market and the current strong and weak industries. At http://www.google.com/finance, you can also obtain market news. However, at this site, you can use a device known as a market screener where you can do analysis on stocks and which stocks you should look at further based on the type of data you input. This is good since there are so many different stocks to select from, any filtering process helps.

Learning stock market statistics is also important since investment without proper benchmarking is high risk. Financial advisors are always doing a fine tooth review of current market trends to reduce their risk. For all kinds of stock market indexing, an analysis of the market opening, closing prices and the trends are important knowledge.

Significant changes are often found by using market statistics and fundamental and technical analysis. A clear distinction between strong and weak shares can be made by a review of financial market statistics. During technical analysis, business trends and potential growth of different companies are checked.

Information about different stocks, bonds, and securities makes an investor aware and helps in perceiving trading volume and over or undervalued stocks.

Financial analysts will often use financial market statistics to determine market share weighting, market value weighting, float adjusted weighting or full weighting.

So it is important to find where the data is to be found for the market as a whole and what potential pitfalls could exist. This will help with the important financial decisions and strategies.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.