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Jason Zweig: How To Lose 93% Of Your Money… And Be Happy About It
FYI: Imagine losing 80% or more while, all around you, investors are basking in the glory of one of the biggest bull markets in history. Imagine racking up year after year of losses while stocks are going up nearly 400%.
These funds do serve a purpose but as always you have to be right twice when to get in and when to get out. Most people are not right that many times in a row.
In a taxable account with large gains, selling half of your equity position even before a bear market can be very expensive. Everyone knows that over a prolonged period equities will rise again, but each individual has to decide what their holding period is. AAII says 4 years will make you whole again. But that does not account for 1929-1933
On average, in the long run, you will lose money if you hold them [bear market funds]. Over time, stocks tend to go up more -- and more often -- than they go down.
Since finance isn't physics with natural laws such as gravity--and even Newtonian physics has been challenged in the quantum age--why should anyone assume the above is axiomatic? What are the underlying reasons for what has happened in the past to markets and do those same reasons for the stock market's rise exist today to the same extent as they have in the past?
Comments
In a taxable account with large gains, selling half of your equity position even before a bear market can be very expensive. Everyone knows that over a prolonged period equities will rise again, but each individual has to decide what their holding period is. AAII says 4 years will make you whole again. But that does not account for 1929-1933
In normal times bonds will work
http://awealthofcommonsense.com/2018/01/even-with-low-returns-bonds-still-have-their-use/
But with interest rates this low there may not be much protection
It is not easy