February 18th, 2015
An extremely important piece of information (click on image to enlarge) from Barry Ritholtz is this graphical comparison of the impact on your portfolio of missing the biggest down days, of missing the biggest up days and of missing both down and up days.
What the article didn’t mention was that the biggest up and down days tend to be clustered together around bear market/crash bottoms rather than randomly during any time period so missing them both is a challenge but not impossible.
Only missing only the biggest up days produced returns less than the buy-and-hold strategy during the time covered. My goal is to capture the most number of biggest up days with the fewest number of big down days through our Market Momentum Meter technique.