CALDEIRÃO DE BOLSA

Over an investing period of about 40 years, he calculated, missing the 10 best days would have cost you about half your capital gains. But successfully avoiding the 10 worst days would have had an even bigger positive impact on your portfolio. Someone who avoided the 10 biggest slumps would have ended up with two and a half times the capital gains of someone who simply stayed in all the time.

Consider the data from Professor Robert Shiller at Yale University. He tracks something known as the "Cyclically-Adjusted Price-to-Earnings Ratio." (These days it is also known as "the Shiller PE"). This compares stock prices with after-tax company earnings, but only after adjusting those earnings to take account of the fluctuations of the economic cycle. This helps avoid the distortions commonly found when you compare stock prices to a single year's earnings.

At the peak of a boom, earnings are artificially inflated, while at the trough they are artificially depressed. The Shiller PE smooths that out.

Can't time the market? It was clear as a bell that investors should have gotten out of stocks in 1929, in the mid-1960s, and 10 years ago. Anyone who followed the numbers would have avoided the disaster of the 1929 crash, the 1970s or the past lost decade on Wall Street. Why didn't more people do so? Doubtless they all had their reasons. But I wonder how many stayed fully invested because their brokers told them "You can't time the market."