Don’t worry I’m not trying to catch you out with some or other insurance related question, but can you really afford to be out of the stockmarket?
For instance, did you know that the average bull market in South Africa lasts around 31 months? Now I’m not talking about the cattle market…I’m talking about the share market as an investment (in case I’ve caused some confusion 😉 )!
It also takes around 21 months for shares to reach the previous high once the bottom has fallen out.
According to the South African financial planning Handbook 60% of the total gain in a bull market occurs in the first 20% of the Bull Run…and believe me when I say the 20% window is long gone as I write this!
Standard bank did research for the period between November 1986 and November 1996 and discovered that the FTSE/JSE all share index grew on average by 20.73% per annum over that period.
Now here’s what’s interesting…
- If you missed the 10 best days in those 10 years your return dropped to 13.79% which is still excellent.
- If you missed the 20 best days in those 10 years your return dropped to 7.10%
- If you missed the 30 best days your return dropped to 5.02%.
- If you missed the 40 these days your return was only 1.47%
Realise we’re talking about 40 days out of 2507 trading days in the last example. If you had invested a thousand Rand, and had missed these 40 best days, then your thousand Rand would only be worth R1, 172 whereas it could have been worth R6, 578.
The South African financial planning Handbook says it best when it says, “staying in the market is 90% of the battle”.
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Until next time.
The InsuranceFundi Team