Secular bull and bear markets of S&P 500 from January 1871 to March 2013. With the exception of the very short secular bull market from 1920-1929 these secular periods range from 14-18 years normally.
This means the average person has less than 20 years to save for retirement. And, very importantly that “buying and holding” during the wrong secular cycle can be devastating to retirement and savings goals. Successful investing, over the specific time frame that you have to reach your retirement goals, is mostly dependent on being in the right secular cycle. Currently, despite the current cyclical bull rally, the markets remain contained within a secular bear market period.
If we truly want to win the long term investment game we have to learn to behave differently. Instead of jumping into, and out of, our relationship with the market – we need to develop an understanding that the equity markets are not “long term relationship” material. That puts us into a position to manage our exposure to the markets accordingly.
A relationship built on the proper understanding of the risk, how to manage those risks, and keeping expectations in line with reality are key to attaining your investment goals. When the markets are being friendly we can enjoy their company – but we do not have to fall in love with them.
Our job, as investors, is to deploy cash into the best opportunities available, at any given time, which will inure to our benefit within our specific time frame. If there are no opportunities currently available – cash is the best place to be.
It is absolutely true that you will miss out on some of the highs, however, you will also miss a bulk of the lows. However, missed opportunities are much easier to replace than lost capital. The one thing that can never be regained is the time lost along the way.
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