Last edited Mon Mar 6, 2017, 09:46 AM - Edit history (2)
[font color = blue]>>I remember watching my balanced investments hit the toilet in 2000 and 2007 while I stood by calmly and unemotionally.<<[/font]
Well, I wasn't calm, nor was I unemotional. But I knew that the stock market always recovers. I knew that the stock market periodically sets new highs. And I knew that it never, ever, sets new lows. I also knew that earnings drives the market in the long-run. The rest is statistical noise and the ebb and flow of emotions.
Looking at the Vanguard Total (U.S.) Stock Market Index Fund, VTSMX -- and using price values adjusted for distributions (so we're talking about total return, not just prices) --
As for the 2000 crash -- It peaked in 3/27/2000, and then fell far, but it reached its peak value again on 10/4/2006 and went on to set new all-time highs. [font color = red] On Edit -- so that's about a 6 1/2 year recovery time measured from the peak. For someone buying at the very peak, that is. For others, the recovery time is less[/font]
As for the 2007 crash -- it peaked on 10/9/2007, and fell way way down, but it reached that peak level again on 3/3/2012, and went on to set new all-time highs. [font color = red] On Edit -- so that's about a 4 1/2 year recovery time measured from the peak[/font]
Since its inception 4/27/92, through 3/3/17 close, it has gone up 9.517-fold during those 24.85 years, which is an average annualized growth rate of 9.491%.
[font color = blue]>>What's that they say? You can't really beat the indexes. But you can loose the farm when the indexes crash. <<[/font]
Only if you sell before it inevitably recovers. Until then, it is just a paper loss.
A sell decision is really two decisions -- when to sell, and then when to buy again.
Very few people are good at timing the market. For the rest of us, time in the market is more important than trying to time the market.
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