Tuesday, March 10, 2009

25 Best Days

People often worry about down markets and investing in them.
Once the market is down, it generally has some of it's best days of growth on the way up.

This makes a teaching from Ramit Sethi especially timely:

From 1970-2006 (the period studied) the average return of the S&P 500 was 11.1%. In that 36 year period, what would your return have been if you missed the best 25 days (less than 1 day per year)?

Was it 11.0%? 10.7%? 8.4%? 7.6%?

Think about it for a minute and then check the excerpt from his book below.

From Ramit's book: “Recently, a group called Dimensional Funds studied the performance of the S&P 500 from January 1970 to December 2006, during which time the annualized return of the market was 11.1%. They also noted something amazing: Of those 36 years from 1970 to 1986, if you missed the 25 days when the stock market performed the best, your return would have dropped from 11.1% to 7.6%, a crippling difference."


At 4/16/2009 , Anonymous Anonymous said...

Hey, Z --

Mazol tov on the engagment!!!

Very cool. Sorry I wasn't there to hear the announcement live.



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