How to Survive a Bear Attack: Time Can Heal Even the Deepest Market Wounds

August 25th, 2017 | Posted in Uncategorized

Ten years ago, the market began one of the steepest nosedives in its history. From Oct. 9, 2007 to the market bottom in March 2009, the S&P 500 lost 56.4%*.

However, as pointed out in a recent article on CNBC’s website even if you had invested on Aug 9, at the top of the bull market, you still would have gotten reasonable returns, “providing you resisted the natural human flight instinct and held tight during a few scary years that followed.”

In the 10 years since the crisis began, the S&P 500 managed a 7.8% average annual return. That’s not much off the long-term average of 9.69%**.

“In the 10 years since the crisis got rolling, the S&P 500 has returned 7.8 percent, annualized, including dividends, the article states. “A standard portfolio mix of stocks and bonds, as reflected in the Vanguard Balanced Index Fund, returned a decent 6.8 percent over the same span, with roughly half the downside volatility experienced by the S&P 500.”

Recovery Didn’t Come Quickly

However, to reap those rewards, investors needed extraordinary patience. “A buyer of the S&P 500 ten years ago had to wait 4½ years just to get back to even (including dividends),” the article points out. “And the balanced-fund buyer spent more than two years under water.”

“At multiple points along the way up through 2010, the trailing 10-year return on U.S. stocks was negative, testing the nerve of investors raised to believe that the market is almost always a good bet.”

The Key to Surviving a Bear Attack? Patience.

For those concerned about investing after an 8-year bull market run, the takeaway is obvious: if you have at least a 10-year time horizon, history suggests it hardly matters when you invest. Fortune favors those with patience, a plan and a high pain threshold. If you want more evidence, be sure to check out our blog posts on why market timing is a loser’s game, and why a long-term view improves your chances of investing success.

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*http://www.nbcnews.com/id/37740147/ns/business-stocks_and_economy/t/historic-bear-markets/#.WZMzZVWGPRY

**1928-2016 S&P 500 annualized return with dividends reinvested. https://dqydj.com/sp-500-return-calculator

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