When looking at a chart of the Dow Jones Index prior to Reagan's second term, spanning the years from 1928 through 1984, it is clear that the stock market goes up over time. However, investing in the stock market over that time was anything but a sure thing. In fact, the only time during that entire period when an investor could safely invest in the index and hold it for a decade resulting in the realization of a worth-while profit was between 1945 and 1955. At any other entry time, the investor had better have a fairly savy exit strategy or be willing to hold their investment for thirty years if they want to make the risk worth their while. Even for those investors insightful or lucky enough to buy at the low on strong down moves, it does not seem to guarantee a worth-while return within a decade without intelligent exit strategies, exemplified in 1970.
So, how can someone effectively invest without getting caught within the complexity of determining entry and exit points?
Well, let's juxtapose a continuous soybean chart with the stock market.
During the period from 1964 through 1984, while the stock market was going sideways, poor entries and exits would double an investment in soybeans. Obviously, this is ignoring some of the ins and outs of commodity trading such as switch orders to roll contracts and other such details the general investor would need to learn. But, as an asset class, the point is still valid. With intelligent diversifaction, lulls in investment returns within the Dow Jones Index can be muted.
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