What would make this more interesting would be to look at a constantly rebalanced portfolio that is a blend of stocks and bonds. That would have performed even better.
@notastartup -- "the best investors" is a complicated statement. Usually investors are graded on an annual basis compared to the market. If you outperform the market and justify your fee (if your fee is 1%, you had better outperform by a lot more than that, or else an index fund would have been a safer way to go), you keep your job, are able to get more capital into your fund, and generally are more highly regarded as an investor. So while I think there is a ton of merit to using an approach like this (or using the rebalancing approach I mention above), this is not what makes successful professional investors successful. That can be ascribed to luck, a ton of luck, skill, nefarious dealings, or any other number of other good or not-so-good reasons.
What's the likelihood of another market crash like the one in the 80s?
What's the likelihood of 2008 housing market crash?
I reckon that the latter is more predictable and omnious, while a sudden market crash without any signs like the one in the 1980s is less likely.
The theory that market is already efficient over a long stretch of time must be true. It reverts to its mean which is a continued bull as long as the economy can fit it.
However, this must be a tough concept to sell. "Hey I just lost 60% of your money because I bought in right at the peak recently, but please don't pull out your money yet, it will recover for sure in 5 years." Again, this example shows the difference between Bob and the average investor. Bob would've said okay, while the average investor would've taken his/her money out and getting ready to sue you for fraud, "but you promised 20% return on my money". "YES, you will get 20% compound interest on your money if you wait another 10 years, believe me the stock market always goes up".
But unlike Bob, you can definitely time your market entry.
1. Wait for market crash.
2. Buy.
3. Check in a couple of years.
You can also apply this bullish bias in markets outside of stocks. Forget daytrading noise, just buy & hold.
1. Buy Crude Oil mini futures.
2. Hold on to it.
3. Check back every few months instead of every few
minutes provided you still can meet the margin calls.
1) Buying every month
2) Only buying at some set period after each correction (e.g. market drops x% over 7 days).
Are there any online tools that make it simple to work out these ideas?