No. of Recommendations: 2
In your example, there are times when it would have been much better to be in cash.

Of course. This is obvious. However, over the long run, most active investors trail the market after considering transaction costs and taxes. Frequent traders as a group trail the market even more because of their higher transaction costs and higher taxes from short-term capital gains rates. That's the reality.

Of course it would be better if you happen to be able to take effective action to improve your investment results relative to the market. The problem is that few people are able to do this. Unfortunately, almost everyone *thinks* they are above-average investors (which is obviously impossible), just like most drivers think they are above average drivers.

The point of my post with the dollar-cost averaging was that you can get a very satisfactory result from doing it over the long run. Of course there will be certain individuals who will achieve long-term returns greater than the market averages, but these people are actually very rare.

Five years is a long time to have a loss.

Why would you care if your investment horizon is 20 years, for example?

In any case, your example is not what I would call a good record.

This is an extreme example where the market dropped precipitously in the beginning. I think it is a very good record, especially if you compared it to the people who were scared out of the market and missed its recovery.

Joel, getting back to Buffett, you are extremely critical of an investment philosophy that you obviously know very little about, which I find remarkable considering how incredibly successful Buffett has been in applying it. I would think that you would be curious as to how someone could achieve such stunning results over a 50-year time period.

Do you mind sharing your long-term investment results with us? I'm a big believer in measuring investment performance. I think most active investors would be very humbled if they knew their true long-term portfolio rates of return, but the reality is that few investors actually calculate their rates of return.
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