Equity market returns after bear markets are positive, and sometimes the rebound is higher than the percentage decline. So investors with long-term horizons can take advantage of lower stock prices when markets are in a downward trend.
The following graphic shows the cumulative equity returns once the bear market ends:
(Click to enlarge)
Equity prices fell about 57% during the recent bear market ended March 2009. But within one year, the markets rebounded by about 67%. After reaching a peak, equity markets worldwide are again falling in recent months due to the European debt crisis, lack of growth in the U.S. economy, inflation in emerging markets, etc.
The chart below shows bull markets with their duration and returns since the 1940s:
(Click to enlarge)
Source: Time-Tested Investment Strategies for the Long Term, American Century Investments
Disclosure: No Positions
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