slotmarket
59 posts
msg #68875
- Ignore slotmarket
modified |
10/29/2008 2:14:25 AM
Let's look at this little scenario. Roll the clock back 20 years. We are living in boom time Japan. I'm 45 years old and will be retiring in 20 years when I'm 65. I've hired a very competent financial adviser who tells me just buy the Nikkei index fund and hold it for 20 years and I will retire a rich man. I couldn't find any reasons to doubt him, after all, the market's been going up year after year and my house too. I instruct my company's 401K plan to take a portion of my pay every week and buy the Nikkei and went back to working hard at my job for the next 20 years. Forward to today, I'm 65 and should be retiring next week.
But I can't afford to retire because when i started buying the index fund back in 1998 the Nikkei was at 28,000 and today it is at 8,087.
How can this be? I did everything right. I bought and held just like the generation before me who retired very comfortably with their huge 401K nest egg. What the hell happened?
chart of Nikkei http://finance.yahoo.com/echarts?s=^N225#chart2:symbol=^n225;range=19840131,20081028;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on
Sorry, I lack skills to embed the chart in the post.
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TheRumpledOne
6,411 posts
msg #68877
- Ignore TheRumpledOne |
10/29/2008 3:53:41 AM
maxreturn
10/27/2008 9:41:33 AM
TRO, let me ask you a question. Let's assume for the moment that you are a swing trader focusing on moves of several days - several weeks off the daily charts. Let's say in October, 2007 you got a buy signal which occurred right near the highs established in 2000. Do you think it would have been valuable to know that in fact you were approaching such historical highs? How would you have known that without consulting a longer term chart? Would you have taken that buy signal knowing it would likely fail? Let me ask you another question. Have you actually compared a monthly or quarterly chart to a daily chart from the time frame of 10/07 - 10/08? You tell me which time frame looks more noisy? If you were a swing trader trading off the daily or even weekly charts you would have known to focus primarily on short opportunities due to the price action on the longer time frame charts. I think I understand why you don't see the value of this because of your trading style. But not everyone trades in the time frame or the style that you do.
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My trading style has nothing to do with my statement that price is price.
Monthly is more compressed than daily.
Quarterly is more compressed than monthly.
But price is still the same.
Pick any point before today.
Look at price today.
The difference between price today and price before is the same on all the charts.
The high and low between those 2 periods is still the same.
It's that simple.
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rharmelink
81 posts
msg #68878
- Ignore rharmelink |
10/29/2008 5:00:33 AM
slotmarket -- I guess my question would be why the Nikkei index when it had such a short history. A few years of stellar movement hardly provides enough history. Just look at all of the country indexes over the last year! I'm not familiar enough with the index to know if it was a hardy one or not.
Certainly, the NASDAQ index suffered a similar fate in 2000-2003, primarily because it wasn't diversified enough. They loaded it up with fast-growing tech companies. It was the "hot" "sexy" index.
But, seriously, any index that would increase 300-400% over a few years has to be suspect. An individual company might be able to sustain that growth rate for a longer period of time, but not a diversified index. Even in such a case, the global economy would be more important in the LONG term. Especially in terms of risk.
http://charts.grahaminvestor.com/%5EGSPC-9-Earliest-to-9-2008.php
Check out the return curves on the chart. What seems sustainable?
Oddly enough, if you stayed with the original S&P 500 stocks, you would have outperformed the index with all of its component changes over the years. The "ultimate" buy and hold?
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maxreturn
745 posts
msg #68882
- Ignore maxreturn |
10/29/2008 8:54:31 AM
TRO, well I see that you didn't answer any of my questions. No matter, either you see the value or you don't. The fact that you don't doesn't mean it doesn't exist.
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miketranz
961 posts
msg #68883
- Ignore miketranz |
10/29/2008 9:34:24 AM
Good sound advice for the very long term players.Number one is the best all around advice,in any market.However,given todays current market conditions,I would'nt want to be caught holding the bag on any long positions.Number seven states checking your account once a year,in these times,you could get wiped out in a matter of months.Its funny,when you tell people that you day trade or even swing trade,they look at you like your from another planet.Like your taking on the extreme risk.Now the shoes on the other foot.When someone tell's me they're a long term player,I could only imagine how buried they are....
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