Wild Week!

Yowza has it been a wild week on Wall Street! This past week has seen the largest single-day drop since the 9/11 (Monday) and also the largest single-day gain in 6 years (yesterday). The last two days (Thursday and today) have seen the market rebound strongly and I'm thankful that I kept my money in the stocks that I own. General Steel Holdings (GSI) is up 9.35% today as I'm writing this.

In fact, I recently read an interesting study from the University of Michigan that supports keeping your money in the stock market for the long-haul. The Towneley Market Timing Study was originally done in the early 1990s, and found that 95% of market gains occurred on only 1.2% of the trading days from 1963-1993.

I'll say that again. 95% of the market gain happened on 1.2% of the days. That's incredible!

Of course the idea is to own the stocks during that 1.2% of the days, and have your money is something safe like short-term Treasury bills for the other 98.8% of the time. This is called timing the market and is virtually impossible. A perfect market timer would have turned a single $1 investment in 1926 into $690 MILLION by the end of 1993. You can imagine how often that happens. As stated by the Towneley study:

"The financial results of perfect timing are indeed attractive. Yet they are virtually unreachable. In terms of the monthly data, for example, if a market timer is right 50% of the time, the probability of executing a perfectly timed investment strategy is 0.5 raised to the 816th power -- or nearly zero."

So what is an investor to do? Well, obviously you want your money in play for that important 1.2% of days. Ultimately the safest choice is to buy and hold for a long time period. I'm looking to hold onto my stocks for a 3-5 year range. That's not set in stone though. Generally, there's no real reason to sell a stake in a solid company so long as the fundamentals of the business don't change.

Am I glad that I had my money in the market for yesterday and today? Heck yes. Was it a painful Monday and Wednesday (drops of 504 points and 449 respectively) on the Dow? Heck yes. But I'm not attempting to time the market. I'm attempting to build wealth over the long run and after rallies like Thursday (9/18) and today (9/19) I remain confident that I'll be successful.

By the way, as I'm finishing up writing this, GSI is now up 10.58% on the day. :-)