For the results of just these “Crosses”, please refer to the below table.
"Let the Trend Be Our Friend"
"Buy and Hold Calamity"
A major Trending Investment Portfolio Strategy (TIPS) criteria utilized by Weisert Investment Services is the use of 50 and 200 day moving averages (MA). Simply stated, when the 50 day MA crosses above the 200 day MA (Golden Cross), and remains there, it is bullish. When the 50 day MA crosses below the 200 day MA (Death Cross), and remains there, it is bearish.
So let’s look at the S&P 500 and see how it has performed utilizing the Golden and Death Crosses.
On 31 December 1999, the S&P 500 closed at 1469.25
Fast forward 8 years
On 31 December 2007, the S&P 500 closed at 1468.36
Fast forward another 6+ years
On 10 January 2013, the S&P 500 closed at 1472.12
These thirteen years of mediocrity can be called the "Buy and Hold Calamity". From a performance perspective, between 31 December 1999 and 10 January 2013, the S&P 500 went essentially nowhere. This was due to the fact the market lost approximately 50% during the bear market of 2000, and another 50% during the bear market of 2008.
The point that I am making is that there has to be a better way than just buy and hold.
So what can you do about it?
On the chart to the right, note that the red line is the 50 day moving average and green line is the 200 day moving average.
In October 2000 the S&P turned bearish, in May 2003 it turned bullish.
In December 2007 the S&P turned bearish, in June 2009 it turned bullish.
If you had avoided those “Large Losses” and stair stepped your account, what would your account be worth today?
How does your current balance compare to December 2007?
Lastly, does the below trend look familiar?
It occurred in the early 70’s when the market went through another bear market, losing nearly 50% (which takes a 100% gain to recoup) over two years.
In closing, we’ve been investing through all these markets and have incorporated this plus other criteria (more detail on the "Strategy" tab) in our TIPS models.