Proactive Asset Management -- Yes, You Can Time the Market

The bear market of 2008 will surely be written to the history book as one of the most brutal ever in the stock market history. As of 11.21.2008, SPX500 plummeted 49% from its all time high of 1576 made in the Oct of 2007. In the same period of time, DOW lost 43%; Nasdaq Composite lost 51%. The record point losses, the vicious circle of deleveraging, asset collapsing and the melting down of the global financial system are simply stunning to watch. Treasury Secretary Henry Paulson called the current financial tsunami a once or twice event in a 100 years. Have we seen the worst of the crisis yet? I think we have a long way to go. What is good about this bear market is that once this bear market is over, the next bull market will be equally powerful to provide fantastic opportunities to profit from. It could be your life changing event if you know how to profit from it. The question you should ask yourself now is Are You Prepared?

With market in panic mode, what is equally stunning (and amusing) is that, nearly all major financial news networks, radio stations, newspapers, financial advisory agencies are calling investors to stay calm, stay fully invested. The argument they use is simple, YOU CAN\'T TIME THE MARKET. This leads to today\'s topic: Proactive Management.

Since the premise has already been set that You Can\'t Time the Market, if you ever do, you will end up badly with miserable returns. In today\'s media, what I hear the most from commentators is the following quote,

In the ten year period ended December 31, 2007, if you remain fully invested, S&P500 average annual return is 5.91%; However, if you missed the 10 best days, S&P500 average annual return reduces to 1.13%.

Let\'s dissect the above statement. The statement has some legitimate points. I can imagine a vivid picture how typical investors missed the best days in the market.

It is a well known fact that the biggest up days all happened in bear markets. Let\'s look at the 10 biggest up days of SPX500 from 1950 up to today Nov 27, 2008.

http://thewallstreetoperator.blogspot.com/2008/11/proactive-management.html