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Since 1935, it's been worse to sell too early than to sell too late

A trader’s hand rests on his keyboard next to a cup of coffee on the floor of the New York Stock Exchange shortly after the opening bell, New York, June 15, 2015. REUTERS/Lucas Jackson

October’s erratic equity trading sessions have sent some investors dumping shares and heading for cover. But some experts are urging investors to reconsider fleeing too fast.

“The opportunity cost of selling too early is often greater than the losses from selling too late,” Dan Suzuki, a portfolio strategist with Richard Bernstein Advisors wrote in a note Tuesday. “The returns at the end of bull markets are often greater than the losses at the beginning of bear markets.”

Combining the average returns in the last year of a bull market, or 25%, with average returns in the first year of a bear market, or negative 16%, results in average net two-year returns of 5% that are positive two-thirds of the time, Suzuki elaborated.

These are the average S&P 500 returns in the six and 12 months pre- and post-bull market peaks since 1935.

Despite posting steep declines for the month of October, all of the three major indices are still up for the year-to-date. The S&P 500 and Dow are each up about 4% as of market close Monday, and the Nasdaq has posted year-to-date returns of about 9%.

Suzuki pointed out that “there seems to be a building sense of discomfort with the sustainability of this bull market,” especially in the wake of a panoply of reports in August declaring this the longest bull market of all time.

“Investors seem ready to cash in their chips and call it a day, especially when the market dips,” Suzuki said.

The bull market may not be sunsetting just yet

“I think we’re in a very short-term oriented correction stage – which by the way is very healthy and natural,” Amanda Agati, co-chief investment strategist at PNC Financial Services Group, said in an interview with Yahoo Finance. “Investors should be using the pullback as an opportunity to add to or initiate positions where maybe they were on the fence previously.”

While there are a host of current concerns to markets – including trade tensions, an increasingly hawkish Federal Reserve and geopolitical uncertainty – “as long as the fundamentals backdrop holds up, we think that the market can move higher,” Agati said.

The latest unemployment data registering at 3.7% pointed to the lowest rate in nearly five decades, while the most recent gross domestic product readings came in at 4.2%, or the best since the third quarter of 2014. Meanwhile, corporate spreads are still fairly narrow, and “nothing major is blowing out the high-yield market,” Agati added.

“We think that 2019 can be another decent year,” Agati said. “We would be cautioning investors not to get too defensive too soon.”

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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