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Monday, May 25, 2009

Update of Market Timer Breakeven Date

With the TSX index continuing to rise in recent weeks, only a select few market timers who remain out of the market are in positive territory. Looking at past prices, we can find the day during the stock market downswing that had the same price level as today. I call this the “market timer breakeven date.”

The following chart shows what I mean:



As prices continue to rise, this date travels further back in time. Apart from a few bumps in the TSX chart, the breakeven date is now back to October 6. Not too many market timers who jumped out of stocks during the downturn managed to do it before this date.

Curiously, a few people I know who jumped out of stocks seem quite unconcerned by all this. They are content to wait until “things calm down,” but fail to see the fact that they sold low and are waiting to buy high.
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4 comments:

  1. AnonymousMay 25, 2009 at 10:42 AM

    An interesting extension of this would be to ask a few market timers how much of a "recovery" (rise in prices) they would need to see before they get back in... add another 10% to the price level and the date will go back even further.

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  2. MG (moneygardener)May 25, 2009 at 10:59 AM

    The S&P 500 date is more like Jan.9

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  3. Michael JamesMay 25, 2009 at 11:00 AM

    Silicon Prairie: Maybe I'll try asking that question the next time the subject comes up. I suspect that the time to get back in for these people has more to do with how they feel than price levels.

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  4. geneMay 25, 2009 at 12:29 PM

    I would have thought most people would have jumped back in by now. I guess it's not easy to change one's mind about something as emotional as money/investing.

    I'm glad I ride out the bumps, since it's even harder to predict the stock market than the economy.

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