BNP Paribas Wealth Management The 5% from 12-month highs system
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May 2, 2025 Discover a straightforward monthly investing strategy that adapts between stocks and bonds based on the S&P 500's 12-month highs. Learn how this method has historically outperformed traditional buy-and-hold tactics. Explore the impressive average annual returns and risk characteristics spanning nearly five decades. Get specific investment recommendations for May that include insights on US stocks, foreign stocks, and gold. Perfect for budding investors looking to enhance their portfolio with an easily implementable approach.
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5% From 12-Month High Rule
- Use a monthly system to invest in stocks only if the market is within 5% of its 12-month high.
- Otherwise, invest in government bonds for the following month to reduce risk and improve returns.
Better Returns With Lower Drawdown
- The 5% system delivered an 11.7% average annual return from 1972 to 2019 on US stocks.
- It reduced maximum drawdowns to -23% compared to -51% with buy-and-hold strategies.
Foreign Stocks Outperform With System
- Applying the system to foreign stocks yielded a 13.7% average annual return versus 9.4% for buy-and-hold.
- This method also lowered volatility and drawdown risk significantly over decades.