How tempting it is to think so now, the way we’ve seen everything rally around the last several months. But you can’t just take your money to the market because you believe in inertia – that things have to inexorably move in the direction they are heading in. What these kinds of ideas would make for is a really sorry stock market strategy.
I hate to pull out the big words, but the Dow Jones industrial average, that’s been around for more than a century, does act in this intuitive way. About three-quarters of the time the Dow Jones has been around, it has reported a rise in the country’s stocks. But it only rose two consecutive years about 60% of the time. The rest of the time, it fell after a rousing year. It certainly looks like the theory makes sense about half the time that stocks rise year on year. The only stock market strategies that are safe then, involve buying something good, and holding onto it until all the rises and falls, average out.
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