ing out trustnet . com st pitfall is much about e is always a market might sometimes ld your nose uy ”
Sleep t manager at 7IM
crash . Nor does it help that you will only find out whether you timed it perfectly with the benefit of hindsight . So are there any occasions when investors should be wary of buying in at what feels like the bottom ? Andrew Milligan , an independent economist , suggests investors will naturally feel cautious after a sizeable
In numbers
Before the crash of last year , Ben Carlson , portfolio manager at Ritholtz Wealth Management , carried out research into the 25 biggest monthly declines on the S & P 500 going back to 1926 .
He found that in 56 % of cases , the index was higher a year later , with an average gain of 14.3 %. Three and five years later , it was in positive territory 72 and 80 % of the time respectively , with average gains of 42.5 and 94 %.
The big outlier was the Great Depression – nine of the 11 occasions that stocks were down one year after a large monthly loss were in the 1929 to 1933 period .
While the classic piece of investment advice is to “ buy when there is blood on the streets ”, Carlson warned this is easier said than done .
“ Buying stocks when they ’ re seriously falling rarely feels like the right move ,” he said . “ Every investor is told to buy low and sell high . But most don ’ t realise that buy low typically works out to buy low , then buy lower , then buy even lower , and once you really hate yourself , buy lower than you thought was possible .
“ The good news is , the lower we go , the higher the expected returns should be .”
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