Maximizing Your Trading Years

I discovered Adam Hamilton in late 2002 and since have read his weekly essays without fail every week. I have incorporated his theory on market cycles into my trading strategy. His research has shown that throughout history markets tend to move in great cycles, long bulls followed by long bears. These cycles are around 34 years long – resulting in a 17 year up cycle followed by a 17 year down cycle. Obviously no market goes straight up or down, so within those major cycles are minor counter-cycles to keep everyone on their toes. Our last major up cycle ran from 1982 to 2000. So, we are now 7 years into the down cycle. If you entered the market in 2003 – it doesn’t feel like a down cycle. However, if you bought tech stocks in 2000 you are still down 50%.

Why am I mentioned this? If the average investor gets serious about investing around 30 and retires at 65, they only have 35 years to really put their money to work. So, if you buy into Wall Street’s buy and hold mantra and time it right at the end of 35 years you will have absolutely nothing to show for your efforts. All of the gains of the first 17 years will be given away in the next 17.