In an exercise of curiosity, we prepared this chart, showing theoretically perfect timing models. These are based as if investment decisions were made with perfect hindsight.
The top chart shows the S&P 500 (blue), the corresponding S&P 500 with dividends reinvested (violet), and the S&P 500, traded using the CrystalBull Calendar Model (yellow). The CrystalBull Calendar Indicator trades solely based on the month of the year. It is a modernized version of the "sell in May and go away" adage.
To these, we added an orange line, which shows the Total Return as if one could go back in time one year, and compare the year's return to 3 month CD's. If the market beat CD's, the investor was in the market for the year. If the market return were less than CD's, the investor went back in time and switched his investment to CD's. In other words, the investor never had a down year, having always chosen the winning investment.
Next, we added a white line using the same 'perfect hindsight' principle, except the investor was able to always choose the winning investment for every month.
Since 1970, a 'buy and hold' strategy has yielded a % Total Return (including dividends), while adherence to the CrystalBull Calendar Model for trading has yielded a % Total Return.
With perfect yearly hindsight (never a down year), the Total Return was %, and with perfect monthly hindsight (never a down month), it was %.
NOTE: Click on the Legend link above the Perfect Hindsight Timing Chart to enable the display of the Perfect Month Timing Indicator.
CLICK HERE to return to CrystalBull Calendar Trading Model.
A Theoretically-Perfect Timing Model
( HINT: Click-and-drag left-to-right on a chart to zoom in to a specific date range. Double-click on a chart to zoom back out. )