The thing about missing drawdowns

Josh here – Michael and I discuss one of our very favorite topics on today’s Live From The Compound – should you buy and sell when the market crosses above or below the 200-day moving average?

As in most market-related questions, the answer is yes, maybe, but maybe not. As we’ll explain, while there are tactical benefits to using this trend line (or any trend line) as a guide, there are environments in which it acts perfectly, and then environments where it does nothing or even hurts you.

And then, of course, there are all the psychological reasons why this discipline cannot be adhered to by most (any?) investors.

Michael shows that by missing the worst days in the market, which typically occur when the S&P 500 is below its 200-day moving average, you will also miss the best days. And by missing the 25 best days of the market over the last 20 years, an investor’s returns would become indistinguishable from simply taking no risk and investing in five-year Treasury bonds.

All the charts in this video can also be found at Michael’s epic new post, “Miss the Worst Days, Miss the Best Days” below:

Miss the Worst Days, Miss the Best Days (The Irrelevant Investor)

Be sure to subscribe to our channel so you never miss an update

Follow us on Twitter

Follow us on Facebook

Talk to us about your portfolio or financial plan here

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. The thing about missing drawdowns – Financial Solutions commented on Feb 08

    […] Josh here – Michael and I discuss one of our very favorite topics on today’s Live From The Compound – should you buy and sell when the market crosses above or below the 200-day moving average? As in most market-related questions, the answer is yes, maybe, but maybe not. As we’ll explain, while there are tactical benefits to using this trend line (or any trend line) as a guide, there are environmen… Source: https://thereformedbroker.com/2019/02/08/the-thing-about-missing-drawdowns/ […]

  2. The thing about missing drawdowns – Ultimate Health commented on Feb 09

    […] The Reformed Broker The thing about missing drawdowns Josh here – Michael and I discuss one of our very favorite topics on today’s Live From The Compound – should you buy and sell when the market crosses above or below the 200-day moving average? As in most market-related questions, the answer is yes, maybe, but maybe not. As we’ll explain, while there are tactical benefits to using this trend line (or any trend line) as a guide, there are environmen… more info… […]

  3. What is bitcoin? commented on Sep 23

    … [Trackback]

    […] Read More Info here to that Topic: thereformedbroker.com/2019/02/08/the-thing-about-missing-drawdowns/ […]

  4. Sell Dumps With Pin Online commented on Sep 27

    … [Trackback]

    […] Information to that Topic: thereformedbroker.com/2019/02/08/the-thing-about-missing-drawdowns/ […]

  5. Bitcoin Era Review 2020 commented on Oct 01

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2019/02/08/the-thing-about-missing-drawdowns/ […]

  6. td easyweb login commented on Nov 26

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2019/02/08/the-thing-about-missing-drawdowns/ […]

  7. Regression Testing commented on Dec 18

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2019/02/08/the-thing-about-missing-drawdowns/ […]

  8. Garage Door Repair Stoney Creek commented on Dec 20

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2019/02/08/the-thing-about-missing-drawdowns/ […]

  9. scotiabank online banking sign in commented on Jan 17

    … [Trackback]

    […] Here you will find 20024 more Info to that Topic: thereformedbroker.com/2019/02/08/the-thing-about-missing-drawdowns/ […]

  10. rolex replica commented on Jan 21

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2019/02/08/the-thing-about-missing-drawdowns/ […]