The No. 1 Way To Make Money After Stock Downturns

| October 11, 2022

You may have heard the saying, often (mis-)attributed to Mark Twain, that history does not repeat, but sometimes it rhymes.

Well, I just saw a table of historical returns that shows how some historical rhyming will benefit our stock portfolios.

Let’s take a look…

This table comes from Charlie Bilello, founder and CEO of Compound Capital Advisors, via Twitter:

The Wilshire 5000 index covers basically all of the publicly traded U.S. stocks. The left side of the table shows that the first nine months of 2022 rates as one of the worst nine-month periods in stock market history.

The right side shows total returns after the nine-month declines. There is a lot of green, indicating positive returns on that table. I think the one-year column is the most revealing. In 18 of the previous 19 decline periods, the market was higher one year later, with an average gain of 12%.

The 28% gains from the “average of worst periods” show that the harder the market fell, the stronger the recovery. If you look at the numbers for the percentage drops similar to the 25.9% of 2022, you see that the 12-month recovery averaged pretty close to the amount of the decline.

These numbers mean the way to make money is to have a strategy to add shares during the downturn and recovery. That way, your wealth is much higher when share prices get back to pre-crash levels.

This post originally appeared at Investors Alley.

Category: Stocks

About the Author ()

Tim Plaehn is the lead investment research analyst for income and dividend investing at Investors Alley. He is the editor for The Dividend Hunter, an investment advisory delivering income investments with double digit growth in share price and dividend payments. Tim’s also editor of Weekly Income Accelerator, a covered call trading service, and Automatic Income Machine, a dividend growth service focused on growing your nest egg.

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