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Stingy Investor Tip Sheet

Sell, Sell, Sell, Eh?

I take a quick look at the downside risk for the S&P500 in Sell, Sell, Sell! Today, I'm going to focus on Canadian stocks in the S&P/TSX Composite.

I start with monthly S&P/TSX Composite data and then calculate how much the index has fallen from its prior peak. You can see the results in the accompanying graph which shows the downside faced by Canadian index investors over various periods.

S&P/TSX Composite Downside Risk: Decline From Peak
[click to enlarge]

The downside risk is reasonably similar to that seen in the U.S. but some of the fine detail is different. Just like in the U.S., declines of 30% to 40% have been fairly common.

We don't have data stretching back to the 1930s for the TSX. But I suspect that the TSX could fall by more than 40% in a 1930s-style bust.

Now, don't get too gloomy. Remember that, despite the declines, the TSX has grown quite nicely over the time period in question.

09/25/2008   10:20 PM EST   Permlink   save & shareMarkets

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