My last post (‘why you can’t beat the market’) ruffled some feathers for some unknown reason. It contained data that supported the idea to keep holding and buying during a bear market. This applies to both DCAing into indices and buying individual stocks when they reach a target buy price. Personally I do the latter.
What I want to share with you is an article from Peter Lynch published in 1997.
https://www.worth.com/from-the-archives-fear-of-crashing/?amp
There are two paragraphs I would like to focus on:
‘A review of the S&P 500 going back to 1954 shows how expensive it is to be out of stocks during the short stretches when they make their biggest jumps. If you kept all your money in stocks throughout these 40 years, your annual return on investment was 11.4 percent. If you were out of stocks for the ten most profitable months, your return dropped to 8.3 percent. If you missed the 20 most profitable months, your return was 6.1 percent; the 40 most profitable, and you made only 2.7 percent. Imagine that – if you were out of stocks for 40 key months in 40 years, trying to avoid corrections, your stock portfolio underperformed your savings account.’
And:
‘If you invested $2,000 in the S&P 500 on 1st January of every year since 1965, your annual return has been 11 percent. If you were unlucky and managed to invest that $2,000 at the peak of the market in each year, your annual return has been 10.6 percent.
Or if you were lucky and invested the $2,000 at the low point in the market, you ended up with 11.7 percent. In other words, in the long run it doesn’t matter much whether your timing is good or bad. What matters is that you stay invested in stocks.’
For those of you who don’t know Peter Lynch his record is immense and I thoroughly recommend reading any of his books.
Have a good Sunday everyone and, once again, this is financial advice.
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