I calculated the 2011 results using this system:
Buy and Hold the Dow: 5.5% gain
Investing only on the "best" days: 8.3% gain
Investing only in the "worst" days: -2.5%
"best" and "worst" are defined by the formula at the beginning of the year, based on the historical data. Obviously some of the "worst" days were "up" days, and vice versa.
Regarding US tax laws, in taxable accounts:
"Buy and Hold" would generally be taxed at the Capital Gains rate (15%), while moving in and out of the market based on "seasonality" would be taxed at the personal income rate (which may be roughly 28%). Even considering the tax implications, the Seasonality method was better in 2011.
