The Stock Market's Wake Up Call

Ted

FYI: Until recently we had gone several years without a double-digit decline in US stocks. For long-term investors, that length of time can lead to a false sense of security and entitlement—believing that stocks should always go up and they have a right to consistently-positive returns. But that has never been the case; if it were, long-term historical and future returns wouldn’t be as high as they have been or are expected to be. The chart below looks at the periodic returns of stocks, bonds and balanced portfolios from 1928-2014, net of inflation.
Regards,
Ted
http://www.servowealth.com/resources/articles/stock-markets-wake-call

davfor

This table is interesting. Using the 1928 to 2014 time period includes the negative impacts resulting from the 1929 crash and the crashes in the 30's. So, it hopefully provides a fairly good "worst case" scenario. The results support the view that including at least some stocks in an investment mix is important for most buy and hold investors even during retirement. I was surprised to see the size of the worst case losses for bonds over all holding periods as well as the frequency of losses over all those periods. That's a warning when looking forward 20 years from today! The resilience of the balanced portfolio was also impressive. It would be interesting to see how using a bond portfolio that included corporate bonds might impact the results.