Every time I talk with any stock broker or investment adviser I hear the same old thing. Just be patient. It may take a while. But it's virtually guaranteed that over any 20-year period stocks will deliver positive real average annual earnings. In other words, hold on for 20 years, and you can't lose.
The idea that you can't lose over a 20-year period is uttered with such conviction, such absolute certitude, that it sounds like a law of nature. Just look at history, they say. How long did it take Wall Street to get back to the peak it reached just before the Great Crash of 1929? About twenty years. How long did it take Wall Street to get back to its 1972 peak, before the long bearmarket of the 1970s? Also about twenty years. So don't worry, they say. The absolute worst we can expect -- I mean the very bleakest, blackest, most depressing, despondent, deplorable market we could possibly face -- would send stock values back to their 2000 peak by the year -- 2020.
I must admit I'm not overjoyed at the prospect of waiting until 2020. By then I'll be well into my 70s. But it's a bit comforting to know that if I hold on to my portfolio that long, I'll be fine. Even if I'm dead, my stock portfolio will be resurrected.
Or will it? The twenty year rule has been true in the United States over the past century, but there's no reason to suppose it will be true in the 21st century. In fact, researchers from the London Business School recently pointed out that the 20-year rule has not been true for most other nations' stock markets. Out of 16 major national stock markets, investors in only five have been guaranteed positive annual returns over every 20-year period during the past century. Some markets have performed much worse. Investors in Japan, for example, would have had to hold equities for as long as 50 years to have been guaranteed average annual positive returns. And remember, all stock markets nowadays are more global than they used to be.
Now don't get me wrong. I'm not saying this bear market will continue for 50 years. I'm not even suggesting it will go on for 20. I just want to share with you the less-than-upbeat news that it might be many several before the market returns to its 2000 peak. You should be aware. So should any politician peddling the stock market as a preferable alternative to Social Security.
