Monthly Archives: April 2015
“Sell in May and go away” is a Wall Street adage based on strong historical data. There is persuasive evidence from the United States markets showing that the months of November to April offer significantly higher returns than the months of May to October. For example data from John Mauldin’s newsletter show that “if you had invested $10,000 in the Dow in 1950 and only kept the money in stocks from November through April, you would have had $684,073 as of the end of 2011. If you reversed the strategy and invested for the May-October period, you would have lost $1,024 over the same 61-year period”. When this analysis is applied to a range of markets there is a similar high correlation.
In the light of strong historical evidence for selling or reducing the portfolio in May, how relevant is this to the current market? As a result… Continue reading
This is a buoyant equity market as a consequence of continuing central bank activities and low interest rates. The bull market is likely to continue but there will be panics along the way. The current market correction provoked by the Greek debt situation and concerns with China is the most recent market panic. The question is, should investors be selling during this correction or is this an opportunity to buy?
With several concerns about the world economy, including sovereign debt, this market is developing into a bubble which has the potential for a very large correction and this could happen very soon or maybe even years into the future. We simply do not know when this will occur and as investors we have to live with market volatility. The question is when should we sell or should we buy?
If this is seen as a buying opportunity, one… Continue reading
With very low interest rates, investors who are looking for better returns have little alternative but to increase their investments in the share market. But equities are a higher risk so is it likely that this bull market will continue? The following is a technical appraisal of the stock market and gives a probability of future performance over coming months.
The United States markets
Investors always need to be aware of economic activity in the United States because that economy gives the lead to future movements in the world economy and equity markets. The weekly chart below of the major United States index, the S&P500, shows a four year unbroken uptrend with no indication of change. The United States economy is in recovery mode and unemployment has fallen significantly from its GFC highs, trends which suggest that this equity bull market should continue.
Further supporting evidence for a continuing… Continue reading
Value investing came into prominence with the publicised outperformance of investors such as Warren Buffet. The idea behind value investing is to buy only those stocks which have good fundamentals when they are trading at less than their intrinsic value. But how effective is value investing for the average investor?
I have become sceptical about the value investing approach after a recent experience with a major fund manager who is a value investor. My investment was an individually managed account which over a two year period underperformed the index and significantly underperformed my other equity investments. In May of 2014 I started to record data on a weekly basis comparing the ASX200 with my investment approach, the funds under management and a value investing approach. In comparing all three portfolios with the index, each had an equal amount of capital invested in a portfolio of 10 stocks.
The value investing… Continue reading