Is Buy and Hold Dead: Cyclical Markets within Secular Markets

According to Ned Davis Research and utilizing the Dow Jones Industrial Averages,  since 1906 there has been four bear markets, 1906-21, 1929-42, 1966-82, and 2000 to ???, in contrast there has been three bull markets, 1921-29, 1942-66, and 1982-2000(DJIA Index). The average bear market lasts 14 years with an average cumulative return of -30.96%. The average bull market lasts 16.5 years with an average cumulative return of  958.79%. Looks pretty impressive  if you just buy and hold, how can you lose. Let’s dig alittle closer into these markets and their volatility.

From 1966 to 1982 according to Ned Davis Research this time period produced a secular bear market. The Dow Jones started around 987 in 1966 and ended at 780. Total change over this secular bear was -21.9%. Was this a horrible time to be invested? Depends if you decided to completely sail your boat or adopt a combination of sailing and rowing so you could handle the rough waters ahead. What do I mean by this? Within this 16.4 years of a secular bear there was six cyclical bull markets averaging 1.25 years with and average return of 41.3%. So you had seven other times that the bear reared its head and wiped out your impressive gain of your buy and hold investment management strategy. How can one reduce volatility and loss in a bear market or even better potentially take advantage of cyclical bull markets during a secular bear?

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

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