Stocks: losing money for 20-30 years not uncommon

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Browser
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Stocks: losing money for 20-30 years not uncommon

Post by Browser »

Stockbug Alert!
July 29th, 2014 by Meb Faber

This is a great chart from Patrick O’Shaughnessy on worst case returns for stocks. As you can see, the US had pretty good returns for the past 112 years, but even then there was a 20 year period where you still lost money. In fact, MOST countries had a 30 year period where you could have lost money- ouch!
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Re: Stocks: losing money for 20-30 years not uncommon

Post by patrick »

Note that you can't necessarily seek safety from this possibility in bonds. US bonds, for instance, have had more than 40 year periods of negative returns.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by MindBogler »

Obvious answer: don't invest in a single country's stock -- diversify globally.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Day9 »

It's almost as if investing involves risk, including the risk of loss of principal. :oops:
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Wagnerjb »

MindBogler wrote:Obvious answer: don't invest in a single country's stock -- diversify globally.
My thoughts exactly!
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Re: Stocks: losing money for 20-30 years not uncommon

Post by bcjb »

This graph and ones like it are posted here periodically, and it's always a good reminder of the risk we're all taking. I find FIREcalc.com very helpful, but of course the future might be even worse than the worst-case historical scenario. Beyond diversifying our portfolios (international+domestic, total market instead of a few sectors or stocks, enough bonds and other fixed income,..), we can't do much about it; the alternative would be to lose money to inflation.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Rodc »

patrick wrote:Note that you can't necessarily seek safety from this possibility in bonds. US bonds, for instance, have had more than 40 year periods of negative returns.
And worse, US has had a simultaneous horrible 30-year period in stocks and bonds! They both stank at the same time.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Rodc »

Day9 wrote:It's almost as if investing involves risk, including the risk of loss of principal. :oops:
Somehow (many) people are always trying to find a way for this to not be true.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Aptenodytes »

Why does "world" not equal "average?"
What is the difference between a USD and a US$?
Why is every entry in real terms except one, and it seems to be some kind of average of the others? And how does something labeled "equal weighted" get to be an outlier? Is it because it is the only one in nominal terms or what? Huh?
Is there any investor who actually is weighing choices that include all-in on Austria and all-in on Japan? If not, how is that granularity relevant?

I guess some people like this chart, but I don't. If it is aimed at US readers it is framed all wrong.

What would be more relevant would be a comparison of portfolios that are US-only and all-world (cap weighted), plus maybe a timid international for comparison (e.g. US 75%/ rest 25%). Now that would be information lots of people could act on.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by z3r0c00l »

But how many put their entire nest egg into the market right before a crash and then never add any more money? I would like to see the worst 30 years for someone who invested $1,000 a year for the entire 30 years.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Calm Man »

It seems like for each country it says "Real". So assuming these are real dollars, although that is important, people invest and get returns in nominal dollars. A better and necessary comparison would be the difference between the stock returns and other asset classes (cash, bonds) during those periods. And by definition each period of time selected cherry picks the absolutely worse possible time. Who except me would invest all their money on the day before the worse period would start.?
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Iorek »

Am I reading the chart wrong? It looks like the US worst case for 20 years was not loss, as the OP suggests, but a 19% gain?
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Re: Stocks: losing money for 20-30 years not uncommon

Post by ASUGrad »

Iorek wrote:Am I reading the chart wrong? It looks like the US worst case for 20 years was not loss, as the OP suggests, but a 19% gain?
I noticed this too. Equal weighted it was down, but then real was up. I'm not sure what the difference is.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by steve_14 »

MindBogler wrote:Obvious answer: don't invest in a single country's stock -- diversify globally.
Yes, I keep half my assets abroad for just this reason. However I think our short dataset regarding these things (last 90 years or so) was probably an abnormally good period for country diversification, mainly due to Japan's contrary behavior in the '30s and '90s. The only thing that will really save you from long term stock risk is fixed income.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by MossySF »

In inflation-adjusted terms:

* Money Market: losing money for 20-30 years expected behavior
* Banks & CDS: losing money for 20-30 years expected behavior
* Commodities: losing money for 20-30 years expected behavior
* Short Term Bonds: losing money for 20-30 years expected behavior
* Intermediate Term Bonds: losing money for 20-30 years common
* Gold: losing money for 20-30 years common
* Long Term Bonds: losing money for 20-30 years not uncommon

Probably the only thing with good odds of exceeding inflation is human capital -- so keep working until forever and make sure you're always learning the latest skills & technology.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by avalpert »

Your data doesn't support your title - losing money for 20-30 years has happened is not the same thing as uncommon. Worst-case scenarios aren't particularly helpful at figuring out what is common or likely.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by pkcrafter »

Browser (OP) has provide the chart and a link to Faber's site. Faber, in turn provides a link to O'Shaughnessy's site which contains the chart and needed explanation of the chart. For instance, equal weighted is investing an equal amount is the top 20 countries. The whole point of this chart, which many posters already determined, is it's important to diversify. Without getting political, it appears the U.S. may be getting more "world-like", which means U.S. equity investing might get riskier and diversification more important. As O'Shaughnessy points out, U.S. investor are heavily overweighted in U.S. market.

O'Shaughnessy's site and chart explanation -- The Dangers of Portfolio Patriotism.

http://patrickoshag.tumblr.com/post/932 ... patriotism

As Faber points out, 112 years is not enough. Same problem with U.S. stocks. Some country returns are heavily influenced by one or two very unusual periods. World War II as one example, and in the U.S., the twenty year period from 1980-2000. What would the U.S. long term data look like without this remarkable period?

I've come to the conclusion that while some consider the long term necessary to get reliable data (Frans, for instance), the long term data isn't really relevant. We don't live and invest in the long term. Oh, by the way, the short term data isn't very helpful either. :happy

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Last edited by pkcrafter on Wed Jul 30, 2014 11:17 am, edited 2 times in total.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Browser »

avalpert wrote:Your data doesn't support your title - losing money for 20-30 years has happened is not the same thing as uncommon. Worst-case scenarios aren't particularly helpful at figuring out what is common or likely.
Seems to me if you can lose money over a 30-year period out of a 112 that qualifies as "not uncommon". After all, that's 27% of the whole time period. You have about a 1 in 4 probability of landing in such a period, at least judging by past results. How do you know you're not in one now? If it began back in 2000, you'll be looking at moths in your retirement wallet when you're hanging it up in 2030. :)
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Aish »

Browser wrote:
avalpert wrote:Your data doesn't support your title - losing money for 20-30 years has happened is not the same thing as uncommon. Worst-case scenarios aren't particularly helpful at figuring out what is common or likely.
Seems to me if you can lose money over a 30-year period out of a 112 that qualifies as "not uncommon". After all, that's 27% of the whole time period. You have about a 1 in 4 probability of landing in such a period, at least judging by past results. How do you know you're not in one now? If it began back in 2000, you'll be looking at moths in your retirement wallet when you're hanging it up in 2030. :)
Correct me if I'm wrong, but one 30-year period is just that, it's one. So it's one out of 112, which is <1%. After all, 1970-2000 is a different 30 year period than 1971-2001.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by hornet96 »

Browser wrote:
avalpert wrote:Your data doesn't support your title - losing money for 20-30 years has happened is not the same thing as uncommon. Worst-case scenarios aren't particularly helpful at figuring out what is common or likely.
Seems to me if you can lose money over a 30-year period out of a 112 that qualifies as "not uncommon". After all, that's 27% of the whole time period. You have about a 1 in 4 probability of landing in such a period, at least judging by past results. How do you know you're not in one now? If it began back in 2000, you'll be looking at moths in your retirement wallet when you're hanging it up in 2030. :)
Well, the beginning and end points of each 30 year time period used are important. There are actually 82 different 30-year time periods in the data (112 - 30 = 82; Year 1-30 is one period, Year 2-31 is another period, etc.). So, if a loss happened only in 1 of those 30 year periods, then your probability of this occurring is only 1.2% (1/82).

So yes, I would call 1.2% "uncommon." So would statistics (i.e. confidence level of 98.8% of this not happening).

Now whether this result is statistically significant or not, using the data available - well, that is another question entirely.....
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Re: Stocks: losing money for 20-30 years not uncommon

Post by avalpert »

Browser wrote:
avalpert wrote:Your data doesn't support your title - losing money for 20-30 years has happened is not the same thing as uncommon. Worst-case scenarios aren't particularly helpful at figuring out what is common or likely.
Seems to me if you can lose money over a 30-year period out of a 112 that qualifies as "not uncommon". After all, that's 27% of the whole time period. You have about a 1 in 4 probability of landing in such a period, at least judging by past results. How do you know you're not in one now? If it began back in 2000, you'll be looking at moths in your retirement wallet when you're hanging it up in 2030. :)
To be fair, neither in the US nor any weighted global portfolio offered in that data could you lose money over a 30 year period, in the US it didn't even happen over 20 years.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by hornet96 »

avalpert wrote:
Browser wrote:
avalpert wrote:Your data doesn't support your title - losing money for 20-30 years has happened is not the same thing as uncommon. Worst-case scenarios aren't particularly helpful at figuring out what is common or likely.
Seems to me if you can lose money over a 30-year period out of a 112 that qualifies as "not uncommon". After all, that's 27% of the whole time period. You have about a 1 in 4 probability of landing in such a period, at least judging by past results. How do you know you're not in one now? If it began back in 2000, you'll be looking at moths in your retirement wallet when you're hanging it up in 2030. :)
To be fair, neither in the US nor any weighted global portfolio offered in that data could you lose money over a 30 year period, in the US it didn't even happen over 20 years.
I noticed the same thing. I don't know what this article is even talking about, just looking at its own table. The only time period shown where US stocks exhibited a loss, was a 10-year period (not 20), just looking at their own table. :confused
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Re: Stocks: losing money for 20-30 years not uncommon

Post by packer16 »

It would be interesting to see the data post 1945 as I think anything close to WWI and WWII happening is much smaller than the historical data implies.

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Re: Stocks: losing money for 20-30 years not uncommon

Post by techcrium »

Does this mean that there has never been a 40 year time period where you lost money on stocks?

My horizon is 39 years.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by YttriumNitrate »

pkcrafter wrote:Some country returns are heavily influenced by one or two very unusual periods. World War II as one example, and in the U.S., the twenty year period from 1980-2000. What would the U.S. long term data look like without this remarkable period?
I wonder how this chart would look if the title was "BONDS: losing money for 20-30 years not uncommon." I'm guessing the government back bonds issued in Reich marks would show a similar result.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by jimb_fromATL »

I don’t quite follow Meb Faber’s comment

“… As you can see, the US had pretty good returns for the past 112 years, but even then there was a 20 year period where you still lost money…”

… when his link to supporting information goes to a site where the author Patrick O'Shaughnessy says

“…While the U.S. has never had a negative 20-year period of returns…”

In somewhat more relevant modern times, it appears that the worst 20 year rolling average for the S&P 500 since 1939 was 3.09% for the period ending In 1948.

The worst 20 year rolling average since 1950 was 6.46% for the period ending in 1978.

Plus it appears that those figures are all for a lump sum invested with no more contributions for the entire period. How many people do that?

Dollar-cost-averaging with periodic investments like most people do invest would usually smooth ot the losses and result in higher average annual returns.

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Re: Stocks: losing money for 20-30 years not uncommon

Post by pkcrafter »

avalpert wrote:Your data doesn't support your title - losing money for 20-30 years has happened is not the same thing as uncommon. Worst-case scenarios aren't particularly helpful at figuring out what is common or likely.
avalpert, the chart clearly shows that the majority of counties have lost money in both 20 and 30 year periods, so it is common. If you want to consider only the U.S. market, it is possible. Arguing that it isn't common can get you into a lot of trouble. It only takes one 20 year "uncommon" period to ruin your retirement. I'd say never underestimate the power of the uncommon. It always seems to show up with you least expect it. :happy
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Re: Stocks: losing money for 20-30 years not uncommon

Post by avalpert »

pkcrafter wrote:
avalpert wrote:Your data doesn't support your title - losing money for 20-30 years has happened is not the same thing as uncommon. Worst-case scenarios aren't particularly helpful at figuring out what is common or likely.
avalpert, the chart clearly shows that the majority of counties have lost money in both 20 and 30 year periods, so it is common. If you want to consider only the U.S. market, it is possible. Arguing that it isn't common can get you into a lot of trouble. It only takes one 20 year "uncommon" period to ruin your retirement. I'd say never underestimate the power of the uncommon. It always seems to show up with you least expect it. :happy
I disagree, I will again say that having happened once (which is all we can tell from this data) even it were in all countries is not the same as common - having happened at least once in some of the countries doesn't make it better.

'Common' is a function of likelihood of occurrence and the data presented gives us no basis to judge that. That of course isn't to say you shouldn't be concerned with uncommon events but that also wasn't what the OP was talking about. I would add though that while uncommon occurrences may happen when you least expect it people have tendency to be overly fearful of them when they are least likely (usually after they just happened).
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Re: Stocks: losing money for 20-30 years not uncommon

Post by normaldude »

Thus, it makes sense to be a long-term holder (30+ years) of a globally diversified portfolio of stock & bond index funds.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Clive »

Inflation at times can be high.

Being on the losing side of a war can be devastating.

Inflation and wars can at times be more widespread/global - in which case more remote continents can be more protected from such global crises.

Diversification reduces the risk/reward. More middle road rather than being entirely right, or entirely wrong.

Isolated emerging markets (Australia, US) can do better than average (global average).

Spreading the risk exposure equally can be better than market weighting (1990 Japan had risen to be a large proportion of the global market, subsequently that dropped right off).

Note however that inflation bonds aren't guaranteed. They might either be capped, or have nominal gains taxed (15% inflation, 15% nominal bond gain, 33% taxation of nominal gain = -5% real).

Gold isn't a assured hedge either. 1933 investment gold compulsory purchased at around the then $20 'current' market price. 1934 gold price hiked up to around $35.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by pkcrafter »

techcrium wrote:Does this mean that there has never been a 40 year time period where you lost money on stocks?

My horizon is 39 years.
40 years, 39 years are long term, but what does this data mean to you? I don't think long term data helps much because we live in one period then another, and it might take 3 or 4 different periods to get to 40 year. None of these shorter terms will look like one another or the long term. For instance, the next ten years are not going to look like the past 10 or the long term. For the investor looking at 40 years, spending 10 years in an unfavorable time period is a loooong time. Since 10 year periods can be unfavorable, does the 40 year investor really have 40 years, or does he have to invest differently the last 10 or 15? When data shows that an investment has not lost money in 20 years, it's not the same as saying the investor missed his projected target portfolio amount.

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Re: Stocks: losing money for 20-30 years not uncommon

Post by Clive »

Rodc wrote:And worse, US has had a simultaneous horrible 30-year period in stocks and bonds! They both stank at the same time.
Because periods of high inflation occurred at the same time.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Oicuryy »

Browser wrote:
In fact, MOST countries had a 30 year period where you could have lost money- ouch!
I'm guessing that 30-year period was 1916-1945; a period that included two World Wars and a worldwide Great Depression. I would call that period uncommon.

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Re: Stocks: losing money for 20-30 years not uncommon

Post by Aptenodytes »

jimb_fromATL wrote: Plus it appears that those figures are all for a lump sum invested with no more contributions for the entire period. How many people do that?
Everyone in retirement.
Your point is valid that the presentation is confusing and unhelpful. I suspect that the majority of his readers are still making contributions.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by hornet96 »

Oicuryy wrote:
Browser wrote:
In fact, MOST countries had a 30 year period where you could have lost money- ouch!
I'm guessing that 30-year period was 1916-1945; a period that included two World Wars and a worldwide Great Depression. I would call that period uncommon.

Ron
And to further this thought with what I wrote above.... what was the 30-year return between 1917-1946? (I don't know, as I don't have time to look it up at the moment).

The point being that time period dependency is both real and important.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by Clive »

Oicuryy wrote:
Browser wrote:
In fact, MOST countries had a 30 year period where you could have lost money- ouch!
I'm guessing that 30-year period was 1916-1945; a period that included two World Wars and a worldwide Great Depression. I would call that period uncommon.
US 1915 CPI = 10.1
1920 CPI = 19.3

UK 1914 Cost of Living Index = 120 (UK real T-Bill Index = 127)
1920 = 299.2 (UK real T-Bill Index = 64 (-50% down since 1914 on a gross basis))

UK T-Bill Nominal Index
1914 153
1915 158
1916 162
1917 167
1918 172
1919 179
1920 190

such that even though T-Bills lost a lot in real terms (-50%) you'd have been taxed on around a nominal 33% 'gain' (raising net real loss on T-Bills to around -60%).


UK 1972 Cost of Living Index = 693
1977 = 1471

That was more or less in isolation (domestic), which then ran into a more global period of high inflation (double whammy for UK)

1985 = 2958
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Re: Stocks: losing money for 20-30 years not uncommon

Post by jimb_fromATL »

z3r0c00l wrote:But how many put their entire nest egg into the market right before a crash and then never add any more money? I would like to see the worst 30 years for someone who invested $1,000 a year for the entire 30 years.
I can tell you right now about the worst 20 years in modern times for the S&P 500, which ended in 1948.

It started with a loss of 9.46% for 1929.
Then it was -22.72% in 1930 and -44.2% for 1931.
Other notable years were
+56.79% in 1935, +32.55% in 1936;
-32.11% in 1937 and +39.35% in 1945.
That was a wild ride.

For a lump sum the CAGR (Compound Annual Growth Rate) was 3.09%. But for Dollar-Cost-Averaging with equal contribtions at the beginning of each year, the CAGR/average APY was 7.47%.

By the end of that period in 1948, contributing $1,000 per year would result in $46,405 for the investment of $20,000.

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Re: Stocks: losing money for 20-30 years not uncommon

Post by Ged »

pkcrafter wrote:Without getting political, it appears the U.S. may be getting more "world-like", which means U.S. equity investing might get riskier and diversification more important.
Well, another way of looking at that is the world is getting more "USA-like". The 20th century was very rough on many countries. Most if not all countries that experienced a 30 year losing period were invaded, lost wars and were generally bombed back to the stone age. Having your institutions and infrastructure ravaged like this is very bad for your stock market. Countries that avoided that seemed to do much better, and had avoided these long losing periods.

Hopefully this won't happen again for a long time. I'm also not sure if diversification is a real answer to WWIII.
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Re: Stocks: losing money for 20-30 years not uncommon

Post by jimb_fromATL »

Oicuryy wrote:
Browser wrote:
In fact, MOST countries had a 30 year period where you could have lost money- ouch!
I'm guessing that 30-year period was 1916-1945; a period that included two World Wars and a worldwide Great Depression. I would call that period uncommon.

Ron
Here are some rolling averages for various lengths of time. These are for lump sums invested in the S&P 500.

Code: Select all

S&P 500  rolling averages for lump sum investments

   end yr    5yr	   10yr	   15yr	  20 yr	  25 yr	  30 yr
   2013	 17.99%	  7.36%	  4.63%	  9.22%	 10.28%	 11.13%
   2012	  1.63%	  7.06%	  4.44%	  8.22%	  9.72%	 10.87%
   2011	  -.27%	  2.87%	  5.43%	  7.82%	  9.32%	 11.03%
   2010	  2.27%	  1.36%	  6.76%	  9.17%	  9.99%	 10.75%
   2009	   .41%	  -.99%	  8.07%	  8.23%	 10.62%	 11.29%
   2008	 -2.31%	 -1.47%	  6.44%	  8.43%	  9.81%	 11.04%
   2007	 12.78%	  5.87%	 10.51%	 11.84%	 12.81%	 13.01%
   2006	  6.10%	  8.41%	 10.66%	 11.86%	 13.44%	 12.50%
   2005	   .45%	  9.08%	 11.57%	 12.01%	 12.53%	 12.77%
   2004	 -2.37%	 12.12%	 10.97%	 13.32%	 13.60%	 13.82%
   2003	  -.62%	 11.11%	 12.27%	 13.07%	 13.92%	 12.25%
   2002	  -.62%	  9.39%	 11.53%	 12.82%	 13.05%	 10.71%
   2001	 10.76%	 13.01%	 13.84%	 15.35%	 13.83%	 12.29%
   2000	 18.44%	 17.59%	 16.16%	 15.78%	 15.41%	 13.28%
   1999	 28.76%	 18.30%	 19.10%	 17.99%	 17.37%	 13.78%
   1998	 24.22%	 19.33%	 18.04%	 17.87%	 15.02%	 12.72%
   1997	 20.41%	 18.15%	 17.69%	 16.75%	 13.12%	 12.16%
   1996	 15.30%	 15.41%	 16.93%	 14.61%	 12.60%	 11.89%
   1995	 16.74%	 15.03%	 14.90%	 14.66%	 12.28%	 10.72%
   1994	  8.69%	 14.54%	 14.60%	 14.68%	 11.00%	  9.96%
   1993	 14.63%	 15.07%	 15.83%	 12.82%	 10.55%	 10.49%
   1992	 15.94%	 16.36%	 15.56%	 11.37%	 10.58%	 10.89%
   1991	 15.53%	 17.75%	 14.38%	 11.94%	 11.23%	 10.27%
   1990	 13.35%	 13.99%	 13.98%	 11.19%	  9.55%	 10.20%
   1989	 20.70%	 17.68%	 16.75%	 11.58%	 10.22%	 10.30%
   1988	 15.51%	 16.43%	 12.23%	  9.55%	  9.68%	  9.68%
   1987	 16.77%	 15.37%	  9.88%	  9.28%	  9.91%	 10.44%
   1986	 20.02%	 13.81%	 10.77%	 10.18%	  9.24%	  9.88%
   1985	 14.64%	 14.29%	 10.48%	  8.62%	  9.58%	  9.47%
   1984	 14.73%	 14.82%	  8.70%	  7.75%	  8.33%	  9.35%
   1983	 17.36%	 10.62%	  7.63%	  8.26%	  8.55%	 10.77%
   1982	 13.99%	  6.60%	  6.89%	  8.26%	  9.22%	  9.98%
   1981	  7.92%	  6.41%	  7.08%	  6.71%	  7.96%	  9.89%
   1980	 13.94%	  8.46%	  6.69%	  8.35%	  8.46%	 10.86%
   1979	 14.90%	  5.80%	  5.51%	  6.78%	  8.31%	 10.90%
   1978	  4.27%	  3.07%	  5.39%	  6.46%	  9.50%	 10.81%
   1977	  -.31%	  3.51%	  6.41%	  8.06%	  9.19%	 10.92%
   1976	  4.93%	  6.66%	  6.30%	  7.97%	 10.29%	 11.31%
   1975	  3.24%	  3.24%	  6.55%	  7.13%	 10.25%	 10.04%
   1974	 -2.58%	  1.11%	  4.21%	  6.72%	 10.11%	 10.06%
   1973	  1.88%	  5.95%	  7.19%	 10.85%	 12.17%	 11.89%
   1972	  7.48%	  9.95%	 11.00%	 11.71%	 13.31%	 13.30%
   1971	  8.42%	  7.00%	  9.00%	 11.67%	 12.64%	 13.38%
   1970	  3.23%	  8.24%	  8.46%	 12.08%	 11.45%	 12.51%
   1969	  4.94%	  7.78%	 10.02%	 13.54%	 12.78%	 12.03%
   1968	 10.18%	  9.95%	 14.01%	 14.90%	 14.01%	 12.47%
   1967	 12.47%	 12.80%	 13.16%	 14.82%	 14.50%	 12.69%
   1966	  5.60%	  9.29%	 12.78%	 13.71%	 14.39%	 10.43%
   1965	 13.48%	 11.18%	 15.19%	 13.61%	 14.46%	 11.88%
   1964	 10.69%	 12.64%	 16.56%	 14.83%	 13.50%	 13.08%
   1963	  9.72%	 15.97%	 16.52%	 14.98%	 12.94%	 12.19%
   1962	 13.13%	 13.50%	 15.61%	 15.01%	 12.73%	 13.10%
   1961	 13.11%	 16.55%	 16.56%	 16.71%	 11.42%	 13.24%
   1960	  8.91%	 16.05%	 13.65%	 14.70%	 11.56%	 10.14%
   1959	 14.64%	 19.61%	 16.25%	 14.21%	 13.57%	  9.22%
   1958	 22.58%	 20.07%	 16.79%	 13.75%	 12.69%	  8.46%
   1957	 13.87%	 16.88%	 15.64%	 12.63%	 13.10%	  8.57%
   1956	 20.09%	 18.32%	 17.93%	 11.01%	 13.27%	 10.07%
   1955	 23.65%	 16.09%	 16.70%	 12.24%	 10.38%	 10.24%
   1954	 24.80%	 17.06%	 14.07%	 13.30%	  8.17%	 10.18%
   1953	 17.61%	 14.00%	 10.96%	 10.35%	  5.84%	  9.43%
   1952	 19.96%	 16.53%	 12.22%	 12.90%	  7.54%	  9.65%
   1951	 16.57%	 16.86%	  8.13%	 11.62%	  8.17%	  9.97%
   1950	  8.99%	 13.37%	  8.67%	  7.29%	  7.74%	  9.56%
   1949	  9.80%	  9.06%	  9.71%	  4.37%	  7.46%	  7.95%
   1948	 10.50%	  7.77%	  8.03%	  3.09%	  7.86%	  8.06%
   1947	 13.20%	  8.53%	 10.65%	  4.64%	  7.69%	  8.34%
   1946	 17.15%	  4.15%	 10.02%	  6.16%	  8.69%	  7.50%
   1945	 17.93%	  8.51%	  6.73%	  7.43%	  9.67%	  8.25%
   1944	  8.32%	  9.66%	  2.62%	  6.89%	  7.58%	  8.03%
   1943	  5.11%	  6.82%	   .73%	  7.21%	  7.58%	  7.19%
   1942	  4.05%	  9.39%	  1.93%	  6.36%	  7.39%	  6.26%
   1941	 -7.42%	  6.62%	  2.74%	  6.67%	  5.67%	  5.81%
   1940	  -.16%	  1.54%	  4.14%	  7.70%	  6.41%	  6.27%
   1939	 11.03%	  -.12%	  6.41%	  7.39%	  7.97%	  6.48%
   1938	  8.55%	 -1.40%	  7.92%	  8.20%	  7.60%	  6.90%
   1937	 14.99%	   .88%	  7.14%	  8.24%	  6.71%	  7.52%
   1936	 22.78%	  8.22%	 11.83%	  9.22%	  8.67%	  7.91%
   1935	  3.27%	  6.37%	 10.46%	  8.11%	  7.60%	  6.93%
   1934	-10.14%	  4.18%	  6.21%	  7.22%	  5.59%	  6.06%
   1933	-10.43%	  7.60%	  8.09%	  7.37%	  6.58%	  7.35%
   1932	-11.51%	  3.42%	  6.07%	  4.73%	  6.08%	  5.09%
   1931	 -4.61%	  6.73%	  5.04%	  5.41%	  5.16%	  5.58%
   1930	  9.56%	 14.24%	  9.78%	  8.72%	  7.67%	  8.29%
   1929	 20.78%	 15.47%	 13.72%	  9.94%	  9.63%	  9.92%
   1928	 29.26%	 18.74%	 14.06%	 11.31%	 11.30%	 10.42%
   1927	 20.86%	 16.13%	 10.78%	 11.00%	  8.77%	  9.93%
   1926	 19.41%	 10.23%	  8.97%	  7.76%	  7.74%	  9.45%
   1925	 19.11%	  9.89%	  8.44%	  7.21%	  8.04%	  9.17%
   1924	 10.40%	 10.35%	  6.54%	  7.01%	  7.87%	  8.52%
   1923	  9.07%	  7.14%	  5.90%	  7.22%	  6.99%	  7.78%
   1922	 11.59%	  6.06%	  7.90%	  5.94%	  7.87%	  6.85%
   1921	  1.76%	  4.11%	  4.13%	  5.01%	  7.57%	  6.15%
   1920	  1.38%	  3.46%	  3.51%	  5.44%	  7.29%	  6.42%
   1919	 10.31%	  4.67%	  5.91%	  7.24%	  8.15%	  6.73%
   1918	  5.24%	  4.35%	  6.61%	  6.48%	  7.53%	  6.34%
   1917	   .80%	  6.09%	  4.12%	  6.96%	  5.92%	  5.86%
   1916	  6.50%	  5.34%	  6.12%	  9.07%	  7.05%	  6.57%
   1915	  5.58%	  4.59%	  6.83%	  8.82%	  7.46%	  6.69%
   1914	  -.69%	  3.77%	  6.24%	  7.61%	  6.03%	  6.66%
   1913	  3.47%	  7.30%	  6.89%	  8.10%	  6.56%	  6.39%
   1912	 11.67%	  5.82%	  9.09%	  7.24%	  6.90%	  6.36%
Rodc
Posts: 13601
Joined: Tue Jun 26, 2007 9:46 am

Re: Stocks: losing money for 20-30 years not uncommon

Post by Rodc »

z3r0c00l wrote:But how many put their entire nest egg into the market right before a crash and then never add any more money? I would like to see the worst 30 years for someone who invested $1,000 a year for the entire 30 years.
Not quite the study you asked for but partly

http://home.comcast.net/~rodec/finance/ ... nBonds.pdf
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
Topic Author
Browser
Posts: 4857
Joined: Wed Sep 05, 2012 4:54 pm

Re: Stocks: losing money for 20-30 years not uncommon

Post by Browser »

Who said the loss occurred in only ONE 20-year or 30-year period? The data presented are for the worst-case scenario: the worst of these periods. I seriously doubt that there was only a single period of 20-30 years within the 112 years in which there was a loss in real terms. It is good to use accurate data to support one's arguments whenever possible.
We don't know where we are, or where we're going -- but we're making good time.
Leesbro63
Posts: 10638
Joined: Mon Nov 08, 2010 3:36 pm

Re: Stocks: losing money for 20-30 years not uncommon

Post by Leesbro63 »

Does the data include dividends? Seems to me that every time I've read about long periods of negative stock returns, dividends have been excluded and the situation looks much better once they are considered.
Clive
Posts: 1950
Joined: Sat Jun 13, 2009 5:49 am

Re: Stocks: losing money for 20-30 years not uncommon

Post by Clive »

Leesbro63 wrote:Does the data include dividends? Seems to me that every time I've read about long periods of negative stock returns, dividends have been excluded and the situation looks much better once they are considered.
The 1900 - 2012 US annualised real of 6.26% is indicative that the figures are total real returns (including dividends).
swaption
Posts: 1245
Joined: Tue Jul 29, 2008 11:48 am

Re: Stocks: losing money for 20-30 years not uncommon

Post by swaption »

Browser wrote:Who said the loss occurred in only ONE 20-year or 30-year period? The data presented are for the worst-case scenario: the worst of these periods. I seriously doubt that there was only a single period of 20-30 years within the 112 years in which there was a loss in real terms. It is good to use accurate data to support one's arguments whenever possible.
Valid point, but nobody said this occurred in only one 20 or 30 year period. The point is that there are many 20 and 30 year periods and the data you put forth is hardly sufficient to say whether it could be considered uncommon or not. Anecdotally, when I think of the worst periods, I think of the run up in US circa 1929 and 2000, or Japan 1990. While moving the start date a few years in either direction could still produce an adverse outcome, I would expect a relatively significant improvement as compared to the worst outcome.

But regardless of the data, the point is still valid. I think it was said best by Day9 early in the thread:

It's almost as if investing involves risk, including the risk of loss of principal. :oops:
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