Bear Market Start May Offer a Strong Finish for Young Investors
by Christine S. Fahlund
Would you rather start investing for retirement during a bull market or a bear market?
After the historically poor performance of equities in the last decade—marked by two ferocious bear markets with overall losses greater than any other time since the Great Depression—some young investors might be considering a reduction in—or total elimination of—-their exposure to stocks.
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However, they may be surprised to learn that, in the past, such downturns have presented investors with rare opportunities to benefit from healthy future returns.
A new study by T. Rowe Price shows that bear markets have provided a substantial advantage for investors who are decades away from retirement. Specifically, the study found that those who began systematically investing in equities in past severe bear markets were significantly better off 30 years later than investors who began in bull markets. Naturally, this effect is even more pronounced if the initial bear markets were followed by big bull markets.
Those who began investing at the start of this decade may be discouraged, but they could have two powerful forces in their favor: the cyclicality of markets and the ability to accumulate a lot of shares early in their career.
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