Gyroscopic Investing

I saw this article on fool.com.

Seems like an easy, mechanical strategy.  It might even be something to consider trying with options.



http://www.fool.com/investing/general/2 ... tth0000001

Of course, when the market is down 30%, how do you know it's not going to keep going down another 10 or 20?

But I guess in the scheme of things, it doesn't really matter much because you're still buying low when everyone else is panicking and selling.

Market falls by 50% or more 2-3 times a century? 

Tell that to a NASDAQ investor who sat through two 50%+ market declines in one decade (2000-2009).

MediumTex wrote: Market falls by 50% or more 2-3 times a century? 

Tell that to a NASDAQ investor who sat through two 50%+ market declines in one decade (2000-2009).

That was only two times in a century!
So far, anyway...

So averaging in based on drawdowns rather than time periods. I'm sure it's been proven to be inferior to investing the $1000 all at once at today's price.

I wonder how well that strategy would have worked since 1990 for a Japanese stock investor.

Pointedstick wrote: But I guess in the scheme of things, it doesn't really matter much because you're still buying low when everyone else is panicking and selling.

I mean...there are some people who like to use their VP to overweight the stock portion of their PP, so I think having some cash to buy when things are a bit cheaper is a good idea.  In reality, it's probably not much different from having a VP that's 80% SPY and 20% Cash and using rebalancing bands.

But...what I was thinking might work would be to buy 1 long term call option when the S&P drops 10%, 2 when it drops 20%, 3 when it drops 30%, etc.  It would probably be hard to buy 3 long term call options after watching your first 3 (the 10% and the 2 20% calls) take a beating, but I'll be if you had the dicipline to stick to it, it would make you some money. 

MediumTex wrote: I wonder how well that strategy would have worked since 1990 for a Japanese stock investor.

Here it is since 1997 (the furthest back I could get).



So...probably not very good.

But, the options strategy might have worked.