Good Bond Days Vs. Bad Bond Days
Jay Kaeppel | Jul 16, 2018 01:32PM ET
There is one school of thought that claims “Timing is Everything” (and in life in general, you can make a pretty good case that that is true). When it comes to the financial markets however, there is another school of thought that says, “Timing is Impossible” (and you can make a pretty good case that that is also true – IMPORTANT DISCLAIMER: Despite the fact that you can make a pretty good case that that is also true, interestingly that fact does little to dissuade millions of investors – myself included – from trying).
Now this desire to time the markets is only a natural part of human nature as we can pretty easily recognize that if we are the markets on “the good days” and out of the markets on “the bad days” we are going to do pretty well for ourselves. Unfortunately, human nature is sort of a pesky thing when it comes to investing (fear, greed, all that stuff). Which leads us directly to:
Jay’s Trading Maxim #17: Human nature is a detriment to trading and investment success and should be voided as much as, well, humanly possible.
Still, he persisted.
h3 Bonds: Good Days/h3Figure 1 displays the growth of $1,000 invested in ticker iShares 20+ Year Treasury Bond (NASDAQ:TLT) – an ETF that tracks the long-term treasury bond ONLY during the last 5 trading days of every month since TLT started trading in 2002.
Figure 1 – Growth of $1,000 invested in TLT last 5 trading days of month (2002-present)
Figure 2 displays the growth of $1,000 invested in ticker TLT ONLY on Trading Days of the Month #10, 11 and 12 (these are trading days, not calendar days).
Figure 2 – Growth of $1,000 invested in TLT trading days of month #10, 11 and 12 (2002-present)
Figure 3 displays the growth of $1,000 invested in TLT ONLY during the 8 trading days of the month listed above versus buying-and-holding TLT since it started trading in 2002 (using price data only, not total return).
Get The News You Want
Figure 3 – Growth of $1,000 invested in TLT last 5 trading days of month and trading days of month #10, 11 and 12 (blue) versus buy-and-hold (red); (2002-present)
h3 Bonds: Bad Days/h3To put things in perspective, Figure 4 displays the growth of $1,000 invested in ticker TLT ONLY during ALL OTHER TRADING DAYS (i.e., you skip trading days of the month #10, 11 and 12 and the last 5 trading days of the month and hold TLT during all remaining days.)
Figure 4 – Growth of $1,000 invested in TLT during all other trading days of the months (2002-present)
Figure 5 displays Good Days versus Bad Days.
Figure 5 – Growth of $1,000 invested in TLT during “Good Days” (blue) versus “Bad Days” (red); (2002-present)
h3 Summary/h3For the record:
- The Good Days gained +266%
- The Bad Days lost -59%
Notice a difference? Does any of this mean that people should start trading in and out TLT a couple of times every month? Not necessarily. Results from month to month can vary greatly. Likewise, the middle of the month trading period has “flattened out” a bit in recent years as yields have started to rise. What happens in a true bond bear market? That’s an excellent question that should be pondered.
Still, as they say, “Opportunity is where you find it.” And “finding an edge” here and there can sometimes make a difference. Food for thought if nothing else.
Have a “Good Day”.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.