True, but QQQ took a big hit in 2000 and didn't fully recover until just a few years ago (April 2000 until Dec 2014). SPY has had a better return so far this year. QQQ far outperformed SPY over the past few years...but mostly just making up for the lost time since 2000.
Can you beat the S&P500 index in the long run?
- Thread starter Trade Prophet
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True, but QQQ took a big hit in 2000 and didn't fully recover until just a few years ago (April 2000 until Dec 2014). SPY has had a better return so far this year. QQQ far outperformed SPY over the past few years...but mostly just making up for the lost time since 2000.
I think those who do not follow the market closely have an advantage with dollar cost averaging over those who follow the market closely. When you invest a lot of time into investing, it can start to affect your psyche / self esteem. You can start to judge your performance and for many, even their self-worth based on how their portfolio is doing. Vs. someone who just blindly does what their advisor or college economics teacher told them to do and simply keep putting money into an index fund. It's easier for them to disconnect their decision making from the results they are getting.
I have tested buy and hold with the following condition - Buy 1000$ SPY at the beginning of each month, during 2001-2021
The results are as follows:
CAGR 2.06%
Max. Drawdown -15% (3/2020 Coronavirus)
Monthly Sharpe ratio 0.64
Profit - 556,434$
This is because in the early years the portfolio is quite small, it takes 13 years to get to a 100K$ portfolio, it takes off from there. you cant expect to make money with no money. this is what I meant When I said that at the end of the day it's the $ amount that is important, not the %.
The results are as follows:
CAGR 2.06%
Max. Drawdown -15% (3/2020 Coronavirus)
Monthly Sharpe ratio 0.64
Profit - 556,434$
This is because in the early years the portfolio is quite small, it takes 13 years to get to a 100K$ portfolio, it takes off from there. you cant expect to make money with no money. this is what I meant When I said that at the end of the day it's the $ amount that is important, not the %.
You invest $12000 each year for 20 years, for a total $240000.
If you invest $240000 in 2001, you would make $745000 profit, much better than your dollar average model.
It's not my model, it's a simple "buy 1000$ every month and hold" approach, you start with 0$ and increase by 1000$ every month, at the end of 2001 you have 12K$ plus the performance of that year
Have you looked at a market timing model? You can dollar cost average into the portfolio but go to cash when the market is below a moving average.(you can experiment with the MAs; 200 day is popular with Wall street; Weinstein suggested the 30 week) Buy back when it crosses above.
Also try different indicators like MACD.
Also try different indicators like MACD.
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story of my life.
Actually the results for buying when it's over a specific MA are worst than the model with no limitations, that's because you don't time the market and buy the dip (even if it turns to a deep ..), proving the fact that you can time the market and better stick with it through the drawdowns
Did you run the numbers?
What it look like to me is that although you were not buying the dips, you were also not buying on the way down. You were accumulating cash that bought more shares when the price crossed the MA on the way up.
Aside from the odd whipsaw you were also selling high and buying low as price crossed the MA.
You were on the side lines for the a couple of the big corrections. (2020 didn't make much difference).
"should". But most don't.