Market Blips

Here is some interesting food for thought:

1. Since 1950 there has never been a 10 year rolling period where the TSX lost money. The lowest 10 year average rate of return was 3.3% was from September 1964 to September 1974. The best 10 year average rate of return was a whopping 19.5% from August 1977 to August 1987.

2. The lowest 30 year average rate of return was 8.6% from June 1952 to June 1982. The highest: 12.7% from August 1970 to August 2000.

3. The single worst 1 year rolling period for the TSX was June 1981 to June 1982 during which time the index lost a massive 39.2%.

4. The single best 1 year rolling period for the TSX was the very next year from June 1982 to June 1983 when the market returned 86.9%.

Cited from “RRSPs” Preet Banerjee 2007

On that note, have a look at the recent Wealthy Boomer article stating that Warren Buffett is a “huge bull on the U.S. economy’. A comforting article given all the recent short term volatility we have seen.

While a complete recovery may not be right around the corner (see yesterday's Globe & Mail article on Buffett ) numbers will tell you again and again that down markets usually last 5 times less than up markets.


My last article focused on the fact that it is better to do nothing with present in a down market. For people invested with a good timeframe that is the best strategy. However, for those looking to invest new money and take advantage of times like these the question is: when is it time to take advantage of a market downturn?

In the last year the highest month for mutual fund sales was in June and the lowest was last month. With the TSX being at it's peak in June this can be seen as a direct correlation to how investors are controlled by emotion in the markets. Last month alone RBC saw a net $1.9 billion assets move into money market to escape the risk of equities.

Being an advocate of long-term, conservative investing it can be obvious in hindsight how emotions can control market timing.

"Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves." Peter Lynch, Worth (September 1995)

Also, being an advocate of the advantages of long-term leverage a correction or down market is the best time to maximize returns (especially given the numbers and long-term trends above). This is one of the topics that I will be discussing on the CFRA program on Saturday.

I will finish with a link to an amazing article from Larry Swedroe . Enjoy!

Experts on Call 580AM CFRA Ottawa Feb 09 4-5pm

I will be featured on Experts on Call this Saturday at 4pm. Topics discussed will be RRSPs, leverage concepts, and debt reduction. You can listen live by going to CFRA's website here.