- Buy-and-Hold's Funeral March
- Getting in Touch with Your Emotions
- Never-Ending Opportunities
This chapter is from the book
This chapter is from the book
This chapter is from the book
Never-Ending Opportunities
“There’s always a bull market somewhere” might have become a cliché, but it’s certainly true. For example, consider the 2000–2002 bear market—one of the drearier times in stock market history—when average investors lost 50% or more of their retirement assets. However, those who turned to opportunities in utilities, real estate, and precious metals might have avoided loss and instead reaped double-digit returns. Table 1.1 offers a few examples from this dichotic period, to illustrate this point.
Table 1.1. Areas That Outperformed in Bear Markets
|
2000 |
S&P 500 |
Home construction |
Oil |
Utilities |
|
−10.1% |
70.3% |
64.3% |
53.1% |
|
|
2001 |
S&P 500 |
Home construction |
South Korea |
Mexico |
|
−13% |
37.2% |
44.6% |
14% |
|
|
2002 |
S&P 500 |
Commodity Tracking Index |
Oil |
Energy |
|
32% |
44% |
44.3% |
||
|
2007 |
S&P 500 |
Steel |
Brazil |
Oil |
|
83.1% |
72.5% |
46.8% |
||
|
2008 |
S&P 500 |
Yen |
Gold |
Dollar |
|
−38.5% |
22.9% |
5.1% |
4.2% |
Even in the worst of times, when it seems as though everything is crumbling, something good is happening. It’s a matter of learning to recognize the signs.
Yes, more evidence of this can be found by looking at the years between 1995 and 2005, when the annual range between the best- and worst-performing sectors was more than 100% in any given year. In 2000, utilities earned 50.5%, while Internet stocks lost 74.5%. In 2004, energy services gained 34.5%, while semiconductors lost 21.6%. The beauty of having a wide range of subsectors at your investment fingertips is that you don’t have to rely on the up or down trend of “one” market. Telecommunications isn’t doing it for you? Maybe healthcare does. Or perhaps real estate is on another uptrend. When you combine the capability to identify subsectors and trends in the market, it creates more opportunity.
Investor Ted Kennedy, who dodged the 2008 market crash, had this to say: “The 2008 market was the most significant bear market I have ever experienced, and the benefits of a trend following strategy were never more clear.” Kennedy notes that: “Protection of capital in significant bear markets has emerged as the most important reason for using this type of strategy.”