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Resilience
Resilience. Sounds like buzzword bingo from the consultant bible at first. However, resilience is actually crucial for long-term wealth accumulation. As already mentioned in the previous chapters, it can be assumed that the stock market will rise in the long term. At the same time, however, such a development never takes place in a straight line, but with strong fluctuations. The fact that market timing (i.e. buying low and selling high as planned) does not work has been scientifically proven many times over. A very good example is provided by Peter Lynch, one of the most successful investors of all time. He managed Fidelity's Magellan Fund from 1977 to 1990 and achieved an annualised return of 29 percent per year during this period. However, Lynch estimates that the average Magellan investor only achieved a return of around 7 per cent per year during the same period. The reason: many investors tried to time the market and got out of the fund after prices had collapsed and only returned when prices were higher.
Bank of America recently analysed what would have happened if the 10 best stock market days within a decade had been missed over the last nine decades. The result is shocking. Instead of the 177-15% return that an investor would have achieved over the past 90 years with a simple buy-and-hold strategy on the S&P 500, an investor who had always missed the 10 best trading days of a decade would have achieved just 28%.
Bank of America recently analysed what would have happened if the 10 best stock market days within a decade had been missed over the last nine decades. The result is shocking. Instead of the 177-15% return that an investor would have achieved over the past 90 years with a simple buy-and-hold strategy on the S&P 500, an investor who had always missed the 10 best trading days of a decade would have achieved just 28%.
