With a trend investing approach, $10,000 invested in the S&P 500 in October 1992 could have turned into $49,438 by October 2010. A Buy and Hold investor would have got only $28,262. Thus over a period of 18 years, trend investing easily beats a Buy and Hold approach in the S&P 500.
Trend Investing - Outperform the Stock Market in 1 Hour a Month
The trend investing results above are not based on any daily trading. These results are possible when you review the trend in the market just on a monthly basis.
What is Easier: Picking the Winners or to Recognizing the Trend
Yes, correct, a Buy and Hold investors who had the foresight 18 years ago to pick exactly the right stocks could have made bigger profits. But who has that capability to pick only the real winners?
Nobody can predict the future. In the chart in this article you can see that also trend investing is not a crystal ball to predict the tops and bottoms in the market. The buying happens after the top and the selling happens after the bottom.
Still the results are very good compared to just buying and holding. The reason is that these longer term trends in the market take… a long time. That is an open door of course but it implies that you do not need to time the top and bottom of the market exactly.
Do You Have 1 Hour a Month to Spare to Beat the Index?
The numbers above do not include dividends. But you can note in the chart that the Trend Investor is holding the S&P 500 related fund for the majority of the time. The differences in dividend collected between the trend investor and buy and hold investor will therefore not be very large.
Only 6 extra trades over 18 years were needed by the trend investor to get to the $49,438 versus the $28,262 for the Buy and Hold investor. To be able to recognize when to make these trades, the trend investor would have to invest maximum one hour a month to review the trends in the market.
If you do not have that hour available, Buy and Hold is probably a suitable option for you.
If you do have the one hour a month available, I like you to know that you can invest your savings in a simple and smart way that provides you with better returns than when you just buy and hold the average stocks or funds.
Disclosure: I am Long SPY.