A useful one screen glance at the state of play in world markets, I find quite useful:https://www.investing.com/indices/major-indices

It's also a good idea to have X number of years outgoings in cash or very low risk/highly liquid investments. But as the graphs shows the recovery periods could end up being longer than your cash holdings. Markets can remain irrational a lot longer than your cash positions

A further extension of that I'm using at the moment is having access to funding/ borrowings. eg 1) we can withdraw over payments on our mortgage, or 2) borrow versus investments instead of selling them. Given that at times when crashes happen, economies often suffer (if they're not the cause in the first place), interest rates will often come down, making financing cheaper. That said your investments would likely have fallen too, so going this route needs care with leverage. I like the ability to withdraw over payments on a mortgage as it has nothing much to do with where the stock market is, whereas borrowing against investments may get into trouble on loan to value/ margin calls etc

Handy also having other sources of income to get you thru those recovery periods without delving to greatly into capital reserves. One reason on private pensions I would consider annuity pensions for part of retirement, even though rates are poor at the moment. Particularly if there are dependents.

Then there's also the state pension lottery

I don't like the Dow as an index either. The fact that it is price-weighted is ridiculous in this day and age, although it would have been perhaps more meaningful in its earlier days. It gets often gets used though because it's been around longer than the S&P 500 which only started in 1923. Generally though wherever possible I prefer using S&P 500.

As CM said though, he used it only as a starting points for provoking thought. While the numbers may have less meaning than S&P or a total return index, there are still some points to take away if someone focuses on the principles and ideas.
 
People also calculate the stats in different ways using different methodologies. There's a load of articles on this type of topic but best not to get tied up on the actual specific and methodology buy more the general takeaways and thoughts.

e.g. this article calcs the length of bear markets in S&P, post WW2, and has the max duration at 36 months

www.mooncap.com/wp-content/uploads/2016/04/bear-markets-Mar2016.pdf

but this article has the longest bear market at 929 days, which is more like 30 months

www.yardeni.com/pub/sp500corrbeartables.pdf

To be honest I think taking peak to trough from bear markets can be misleading for certain purposes. Sometimes what counts is how long a market can go without regaining your starting point, which also depends where you start. That can be a lot longer than the 30 - 36 months suggested by the 2 articles above, so that data can end up being a bit useless too if not careful.

Bear markets naturally have exaggerated peaks and troughs. After an extreme case of a crash, gains can often be more extreme and in a shorter period too

To me they are all just different sets of data which throw up ideas. Some similar some not.

There's some similar generic questions that come up though. A key one being for me of how long could I go without achieving positive returns.

You're correct that divs might be better included for total returns. But to me doesn't mean it is meaningless to exclude them. Just different data sets, which might or might not highlight different things. If someone prefers growth stocks for example that would be a different data set again than either S&P 500 total return or S&P 500 excluding divs

Following on, here's some of Fletchsmile's own data. Bearing in mind I'm interested in how long could I go without achieving positive returns (in the "US stock market", reflected by S&P500):

On 31 Dec 1999 S&P 500 was 1469.25. Yet 10 years later on 31 Dec 2009 the S&P was only 1151.1. That's only approx 76% of its starting value.

So excluding divs that is a loss of about a quarter after 10 years.

AyG wanted to include div yields. The average div yield on S&P 500 was around 2%-3% ish I think. So even with divs someone would only have been about breakeven in nominal terms between those dates. Perhaps a small loss, but someone would need to look up actual div rates or use a total return.

So the whole of the noughties a US only S&P investor would have a lost decade and made nothing in real terms (perhaps even a small loss), and definitely a loss adjusted for inflation

If someone used 31 Dec 2008, though the picture is clearer still, and highlights my question even better. S&P 500 was only 903.25. That's about 61.5% of its 31 Dec 1999 starting point. That's a loss of 38.5% over 9 years! Even if someone wants to throw in dividends (again around 2% - 3% p.a.). That's still a definite loss including capital + divs for 9 years.

That noughties decade and 9/10 years to me is more serious than knowing bear markets peak to trough were 30 - 36 months.

Dividends alone aren't the answer. But help. While excluding them understates the recovery time, I feel looking at bear markets alone can overstate a recovery time or period of negative return.

When we start talking a recovery period of 9/10 years that makes me think about the US only guy that holds 3 to 5 years cash just in case. Sure he rides out the bear market of only 2.5-3 years at worst, but has till lost money over 9/10 years and he could well have been dipping into capital to live off, so his portfolio doesn't survive that 10 years.

No doubt there are longer periods than the 9/10 I highlighted, as my data goes back only to 1990's for this purpose.

[There are probably some recovery periods like the 16 years in the Dow graph. While I don't like the Dow graph and use of the Dow, my own data set tells me that the questions provoked are worth thinking about, even though the Dow data itself isn't that great, and even though divs are excluded]

Takeaway: A little tongue in cheek, but valid: Don't be a US citizen who invests only in a S&P 500 via an ETF as you think that's the cheapest option and the US gives the best returns over time. Not a pretty time of it if you did so in the noughties or they come round again.

One of the biggest take-aways though is diversification and not to rely on a single market (reflected by an index whether the S&P 500 or the Dow)

Someone could easily cut down that 30-36 month bear market by diversifying asset classes and geographies. Useful also to have your own data and understand how your own portfolio can perform. Construct it to avoid that 10 years of ended up with worse than you started, not just the bear markets of 30 -36 months duration. Particularly if you only hold 3-5 years cash

Thankfully at this stage I dont need divis, nice as they are, the performance has been utter crap, heads should roll.


www.hl.co.uk/shares/shares-search-results/b/bhp-billiton-plc-ordinary-us$0.50

www.hl.co.uk/shares/shares-search-results/a/astrazeneca-plc-ordinary-us$0.25

www.hl.co.uk/shares/shares-search-results/g/glaxosmithkline-plc-ordinary-25p

www.hl.co.uk/shares/shares-search-results/h/hsbc-holdings-plc-ordinary-usd0.50



At one time or another I held all of them and have off loaded them, I dont like sleepless nights and the volatility.

Fair question for later stages in life.

As rgs also touches on a big driver will the returns you need from your assets to support your life style. Generalising examples:

"Loads of money" even cash with zero return would see you out. After that what do you want/need to leave behind? If you've enough cash at 70 for 30 years of life from capital including inflation increases, then why take the risk or give yourself worries?

"Enough to get by but need a decent return from it". Here you start to step into bond country and or equities / mixed portfolio. You need to take "some risk" can't afford cash only from capital and inflation will make that worse

"Need a high return" - here you're drifting into having to take higher risk. At the top end you could even be pushed towards all equities in the extreme, as the return from bonds and cash won't be enough to live on especially in the future after inflation

"You're f***d". You haven't planned or done well enough with your finances throughout your life and suddenly realise its too late . Even taking high risk you won't generate enough return.

In reality these are more of a spectrum than distinct categories. and there are more factors / dimensions.

People run into problems when the return they need exceeds their appetite for risk. Early in life its less crucial in some ways as there's the opportunity to find new sources of income such as a better job and you can more easily decide to change the size of your pot as well as decide to take more risk and maybe make it back later if it goes wrong. Later in life it becomes harder to change the size of the pot and more severe if it goes wrong. Your pot will have sort of become fixed, and your choices are more limited

Risk and return are often two sides of the same coin. But there's much more to life than coin

Hopefully you get to choose rather than have it chosen for you . The more right/ideal you get it the more you will get to choose later in life. The more you get it wrong/ less than ideal the more the choices may get made for you if you still have a chance to obtain the income / lifestyle you want