Monday, June 22, 2009

Average first year of bull markets.

I have written earlier about the risk of missing the early bull market. Here’s the main points I’d given.

  • While bull markets have often lasted for multi-year periods, a significant portion of the gains have typically accrued during the early months of a bull market rally.
  • Within six months, more than one quarter (27%) of an entire bull market’s performance (on average) was already in the books.
  • The first 12 months of the average bull market has provided more than 40% of an entire bull market’s price appreciation, yielding on average 45% for investors.
  • Those who choose to re-enter after a few months of positive performance—when the climate feels “safe”—may miss a sizable portion of a bull market’s overall gain.

Came across this chart from Ned Davis research which nicely summarizes the above information in a chart form:

The numbers may be a little different, but the basic idea remains the same: Missing the early bull market can be extremely costly.

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