The Stock Market Double Double -- Insights from History
Each year I update a chart that shows the percentage annual returns in the S&P 500 for every year since 1926; here's the version through the end of 2009. Note that 2008 was the second-worst year on record.
Annual Stock Returns Since 1926
This chart provides a good visual of what I call the "stock market double double."
If you look at the chart again, you'll see that there are approximately twice as many "up" years as "down" years; that's part one of the double-double. Here's part two: the "up" bars go up about twice as high as the "down" bars go down.
If you believe that the stock market will come back from its big drop in 2008, you have history on your side and you just have to wait for the "up" years to return. So far, 2009 has given us hope! For most of us, our retirement investing horizon gives us the time to ride out the downturns. It particularly helps if you build complementary sources of retirement security that aren't susceptible to market fluctuations, which I highly encourage you to do.
Steve Vernon
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Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops
and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.
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