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Chart of the Month |
The Dangers of Timing a Bear Market

April 2, 2020  | by Ivo C. Nenin

COVID-19 | Market Commentary

It has been well documented that trying to avoid market downturns by selling out of stocks and moving to cash can be damaging to long-term portfolio values. And while there are strong behavioral motivations driving a desire to try and protect the portfolio on the downside, the chart below makes clear why it is so potentially dangerous to fall into this trap. The reason is that taking this approach requires an investor to get two things right – when to sell and when to buy once the market starts to recover – missing just a few days can have a severe impact. Over the last 21+ years, missing the 10 best days of returns in the S&P 500 would have resulted in a $1 million portfolio achieving one third of the average annual returns and less than half of the portfolio value versus a continuous investment over that time period. This is a strong argument for long-term institutions to remain committed to their policy allocations even in the face of very difficult market conditions.

Chart of the Month | Impact of Being Out of the Market

Authors

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Ivo Nenin is a member of the Commonfund Asset Management Investment team and is primarily responsible for investment monitoring, rebalancing and reporting for investment portfolios with a focus on our global multi-asset program. Ivo previously assisted in managing Commonfund’s commodities program and as a fund analyst focused on valuation and reporting for the commodities and equity funds. Prior to Commonfund, Ivo worked at AIG in their Domestic Brokerage Treasury Department. Ivo earned an M.B.A. from New York University’s Stern School of Business in Finance and Management and his B.S. in Finance and Accounting from the University of Bridgeport. He holds CFA and FRM designations as well as FINRA 3, 7 and 63 licenses.
Ivo C. Nenin
Director, CFA, FRM
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Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. Forecasts of experts inevitably differ. Views attributed to third parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information. Past performance is not indicative of future results. For more information please refer to Important Disclosures.

Disclaimer

Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. Forecasts of experts inevitably differ. Views attributed to third parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information. Past performance is not indicative of future results. For more information please refer to Important Disclosures.