Past results do not guarantee future returns.
After reviewing several cycles, the 412 algorithm’s stocks follow an interesting pattern.
The specific 412 algorithm was made to increase on market returns, but it does not claim the ability to never drop in value, in theory or in design. It simply outperforms the market.
That is, the system performs about as you would expect, stocks it picks will typically drop in value when the entire market does, and will typically rise when the market does. In the event of a longer market downturn, the stocks value sometimes drop more than the market. But it more than makes up for this by far exceeding the market returns during a market recovery. Those are the specific attributes.
This is actually common in the world of value investing. It is also why the system works best when it invests in a wide field of many stocks. Because stocks of good value are valuable, they are not immune to market downturns, but will recover their stock prices and more afterwards, weathering storms. This means that, during a downturn, it is highly inadvisable to sell.
In fact it is wise to increase investments, as there are more value opportunities when others are selling stocks heedlessly!
Warren Buffett said it well: “Be fearful when others are greedy and greedy when others are fearful.”
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