Tag Archives: Brett Arends

Arends Case for Moderate Market Timing

Wall Street Journal columnist Brett Arends recently penned another piece on the dangers of blind “buy and hold” investing.

Citing a study by Spanish academic Javier Estrada, Arends makes an argument similar to a recent post on The Big Picture that took great interest in the upside of avoiding the market’s worst days.

The study by Estrada, a finance professor at the IESE Business School at the University of Navarra, seems exhaustive, covering, Arends writes, “nearly a century’s worth of day-to-day moves on Wall Street and 14 other stock markets around the world, from England to Japan to Australia.”

Over an investing period of about 40 years, he calculated, missing the 10 best days would have cost you about half your capital gains. But successfully avoiding the 10 worst days would have had an even bigger positive impact on your portfolio. Someone who avoided the 10 biggest slumps would have ended up with two and a half times the capital gains of someone who simply stayed in all the time.

Arends doesn’t come out in favor of trying to hop in and out of the markets day-to-day but he does argue that these gyrations give added value to dividend-bearing stocks which offer a steady, predictable portion of their total return. Continue reading

Is Indexing the Answer to Herd Investing?

That investors buy at the top and sell at the bottom is a sad truth that has been well-established as typical financial behavior. A column in today’s Wall Street Journal raises the question: what should investors do about that?

The usual answer is to argue for indexing — if we “can’t” beat the market, we might as well join it. But the Journal’s Brett Arends says the better answer is to bet against the herd: when the market is going up, get out. When it’s going down, buy. Continue reading