From wealth management firm Bespoke Investment Group, there have been 27 bear market declines in the S&P 500 since 1929. It should be noted that Bespoke has a very clear definition of what it believes constitutes a bull and bear market. A 20% (or greater) bounce from recent lows that was preceded by a 20% (or greater) decline represents the start of a bull market. Meanwhile, a 20%+ drop from recent highs, which was preceded by a 20%+ rally, signals the beginning of a bear market.
Data from the 27 bear markets the S&P 500 has endured over the past 94 years shows the index has averaged a 35.1% loss. More importantly, bear markets have lasted an average of just 282 calendar days (about 9.5 months).
On the other hand, the 27 bull markets the S&P 500 has enjoyed over the past 94 years have led to an average — I repeat, average — gain of 114.4% !
Furthermore, bull markets have gone on for an average of 1,011 calendar days, or close to three months shy of three years. Put another way, the average bull market has lasted slightly more than 3.5 times longer than the typical bear market since 1929.
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Using good ole hindsight the current S&P bull market started in Oct 2022.
Using the statistical average it could have further to run, although the later you board the train the higher the risk.
One certainty is the current bull market will be followed by a bear market but as always the timing is the unknown.
A reminder of the rules for the Snowball, there are only 3.
Buy Investment Trusts that pay a dividend and use those dividends to buy more Investment Trusts that pay a dividend.
Any Trust that drastically alters their dividend payments must be sold, even at a loss.
Remember the rules.
Investment Trusts are the favoured investment as most have reserves to pay the dividend in times of panic as during the Covid market melt down.
Snowball Effect Investing | Compound Your Wealth Like Warren Buffett
August 29th, 2024 by Bob Ciura
The snowball effect shows the power of compounding.
When you push a small snowball down a hill, it continuously picks up snow. When it reaches the bottom of the hill it is a giant snow boulder.
The snowball compounds during its travel down the hill. The bigger it gets, the more snow it packs on with each revolution. The snowball effect explains how small actions carried out over time can lead to big results.
In the same way, investing in high-quality dividend growth stocks can generate large amounts of dividend income over long periods of time. That’s because dividend growth stocks tend to pay rising dividends every year. And then you can reinvest those rising dividends to purchase more shares each year. This results in an increase in the total number of shares you own, as well as an increase in the dividend per share, for a powerful wealth compounding effect.
When the Nobel Prize-winning scientist Albert Einstein was asked to identify the most powerful force in the universe, he is said to have replied: “compound interest”. It’s no joke to say that the mathematical phenomenon of compounding – or the ability for gains to grow on gains and income to arise from income – provides a powerful tool for anyone seeking to accumulate wealth. However, you will need time to make it work.
Goldman Sachs analysts, for example, project the S&P 500 may only generate an average annual return of 3% over the next 10 years due to high valuations and the resulting concentration of value in the index’s biggest holdings.
JPMorgan analysts believe the index will deliver an annual return of just 6% over the next decade.
U have 100k to invest for your retirement in ten years time.
If u buy a S&P tracker and let’s be optimistic and use the 6% growth figure, your 100k could be worth £179k, could be more could be less.
If u use the 4% rule that would give u income of £7,160 pa, u would need a cash buffer but at the present time u could earn 4% on that cash buffer.
If u buy an annuity, lets be generous again and use a 6% figure, income of £10,174 pa
Canada Life figures show the 65-year-old with a £100,000 pension pot could buy an annuity linked to the retail price index (RPI) that would generate a starting annual income of £3,896. That’s up from £2,195 in the New Year following a 77% spike in rates this year. Oct 22
It could be less and u have to surrender all your capital but it’s only your retirement u are gambling with.
If u invest in a portfolio of income producing Trusts u could earn 8% and if u compound the dividends at 7% u would have income of 16k pa. If u leave the funds uncrystallized 25% of that would be tax free and all future dividends would also be 25% tax free. U could pass on your fund to your nearest and dearest but remember those wee cats and dogs.
It’s only your retirement u are gambling with so it depends if u are a gambler or an investor. GL
The Power of Dividends in Bear Markets Investing in dividend stocks is a favourite strategy of mine and it might be even more important if we see a Bear Market.
A lot of famous people are telling us a major correction is coming soon. Are they right?
Not necessarily. They’ve been predicting a huge crash for two years now.
But if we do see a crash, wouldn’t it be great if we didn’t care?
How do we do that?
Dividends.
Here’s why dividends are great during Bear Markets.
1. Consistent Income in Uncertain Times
When stock prices decline, dividend-paying companies still give us regular cash payouts. This income stream can help us deal with the blow of falling portfolio values, offering a tangible return even in a declining market.
For long-term investors, dividends provide a source of steady income that can be reinvested to buy more shares at lower prices. This compounding effect enhances returns over time, helping to offset the losses incurred during a bear market.
2. Lower Volatility
Historically, dividend-paying stocks have less volatility than non-dividend-paying stocks or the market. During bear markets, this reduced volatility translates to smaller declines, helping us preserve more of capital.
For example, during the financial crisis of 2008, high-quality dividend-paying stocks declined far less than the broader market. This stability, relatively speaking, makes them a valuable addition to our portfolios during periods of high market uncertainty.
3. Outperformance in Historical Bear Markets
Looking back at past bear markets, dividend-paying stocks have consistently outperformed market indexes. For example:
During the 2000–2002 dot-com bust, high-dividend-paying stocks declined far less than the tech-heavy NASDAQ index.
In the 2008 financial crisis, dividend-paying stocks provided more stability and a quicker recovery compared to non-dividend payers.
These patterns show us the resilience of dividend stocks during market downturns.
4. Psychological Benefits of Dividends
In a bear market, fear and panic often drive investors to sell, locking in losses. Dividend stocks provide a psychological advantage by giving out consistent income, which can help us stay calm and maintain a long-term perspective.
Knowing that we’re earning a return, even as prices fall, makes it easier to avoid emotional decisions and stick to your investment strategy.
Final Thoughts
Bear markets are challenging, but dividend stocks offer a way to weather the storm. Their consistent income, defensive nature, and lower volatility make them a great choice for preserving wealth and generating returns in down times.
As noted in the Company’s half-yearly results announcement, the Company has now completed the process of removing its currency hedges. Net cash released as a result which was being held against the potential for margin calls on the hedges will be applied to reduce the Company’s gearing.
In the September quarterly report the Company noted work being undertaken in regard to the Razor Group following their business combination with Perch. More details on this will be included in the December quarterly report, but business performance over the last quarter has been poorer than anticipated and it is currently expected that the year-end valuation of Razor will be materially lower than at the last valuation point
Fancy a 13.9% dividend yield? Consider these dirt-cheap investment trusts!
These investment trusts are trading at whopping discounts to their net asset values (NAVs). Here’s why they could prove to be brilliant buys.
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Royston Wild
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Investment trusts can deliver large returns while allowing investors to effectively diversify. But times have been tough for these companies more recently.
Victoria Hasler, head of fund research at Hargreaves Lansdown, notes that
She also notes that “over the last couple of years we have seen some good quality investment trusts trading on hefty discounts“. This remains the case as we head into the New Year.
So I’m searching for the best value trusts to consider today. Here are two of my favourites.
Octopus Renewables Infrastructure Trust
Donald Trump’s return to the presidency has sent a shockwave across renewable energy stocks. Even companies with little-to-no exposure to the US have slumped following November’s election.
This provides a terrific dip buying opportunity in my opinion. One such business that’s caught my attention is Octopus Renewables Infrastructure Trust (LSE:ORIT).
At 63.5p per share, it trades at a huge 38.7% discount to its estimated net asset value (NAV) per share of 103.6p.
Recent share price weakness has also turbocharged Octopus’ dividend yield to 9.5%. To put this in context, the average for FTSE 100 shares is way back at 3.6%.
I like this trust because of the excellent diversification it offers. It generates power from offshore and onshore wind turbines as well as from solar farms. This allows consistent power generation across all seasons, and boosts efficiency by using technologies that are tailored to different environments.
With assets across the British Isles, Finland, Germany, and France, it can also remain profitable despite poor weather or regulatory issues in one or two regions.
Importantly, it also has no exposure to the US, removing uncertainty over the future of green policies under President-elect Trump.
Such fears — however impractical — may continue to weigh on Octopus’ share price. But over the long term I think it could prove a robust investment.
Gore Street Energy Storage Fund
The Gore Street Energy Storage Fund (LSE:GSF) shares several characteristics with the Octopus trust.
Its share price has declined due to falling confidence in renewable energy. This is because demand for its technologies are tied to growth in the renewables sector, where they provide a stable flow of energy even during unfavourable weather.
Gore Street is also vulnerable to higher interest rates that dampen asset values and increase borrowing costs.
But like Octopus, it also offers excellent value I find hard to ignore. At 50.6p per share, the trust trades at an 49.7% discount to its NAV per share of 100.7p.
Meanwhile, its forward dividend yield is a staggering 13.9%.
This is another share with considerable long-term potential as the world switches away from fossil fuels. Bloomberg estimates the global energy storage market will experience an annual growth rate of 21% between now and 2030.
And Gore Street is rapidly expanding to supercharge long-term revenues. Operational capacity leapt 45% in the 12 months to September, to 421.4 MW.
