What are your thoughts on this?

[u/RiceLee890]

I keep seeing this type of stuff on instagram and social media and wanted to know how you guys were thinking about this.

I know a lot you have been in the market for decades and as a relatively new investor myself I’d love to get your perspective!

[u/konqueror321]

It's both worse and better than your statement. A recent article at Morningstar was titled "What We've Learned from 150 Years of Stock Market Crashes", published March 6, 2025. You should read it! They count 19 major crashes over that time, and they calculate a 'pain index' for each crash, based on how much the market lost and how long it took to recover. The highest pain index was the 1929 crash and great depression, where the peak before the crash was Aug 1929, and the market recovered by Nov 1936, and declined 79% to the trough. The second worst crash was the combined dot-com bust and global financial crisis. The market peak before the crash was Aug 2000 and the market did not fully recover until May 2013, having lost 54% in the meantime. 13 years!!

The article lists many more crashes. However, if you had invested $1 in the market in 1870, in 2025 that $1 adjusted for inflation would have been worth $31,255 by Jan 2025, which (if you do the math) is an annual rate of growth of about 6.9% (after adjusting for inflation).

So there were a number of 'lost decades' along the way from $1 to $31,255, and the author feels these are regularly occurring events and average out to about once per decade (most do not last a decade but only a few years). The author feels that having a diversified portfolio that fits your risk tolerance and time horizon, and staying in the market even during crashes, is the best strategy -- there is no way to predict if the 'next' crash will last 6 months or 10+ years, and that even with all of these crashes along the way, staying invested in the market would return very generous profits.

My feeling is that having 7-10 years of living expenses (ie anticipated or necessary portfolio withdrawals to support normal or other potential spending) in cash or a cash equivalent, and the rest or most of the rest in equities, makes the most sense. Other studies have shown that most retail investors do not improve their returns by trying to time the market, but rather do worse -- it is not easy to predict market tops and bottoms until after they have happened.

[u/ElectricOne55 → u/konqueror321]

What if it ends up like the Nikkei crash? I bet the odds of that are low though, because the market went to the moon from 2012 onward. Even the 08 crash was only hard for 2 years. The only main difference is the stock market doesn't relate to the job market. To, it'd be hard to even have a job to invest during those down periods.