Thursday, May 20, 2010

US Stock Market Statistics

The equity markets have provided wonderful growth opportunities and have built tremendous amounts of wealth throughout history. This is NOT to say there isn't any risk associated with the capital markets because there is always a risk/return equation for everything in life.

If history can be used as a guide, investors should expect to see routine declines of 5-10% quite often with more more pronounced retreats every few years. Since 1900 (through 12/31/2009) there have been 374 corrections of at least 5% and 32 declines of 20% or more.

So, a lot of history made short - bull & bear markets - are actually healthy and should be considered part of the overall game plan. Don't panic. Maintain your perspective and make sure your portfolio is aligned with your long term financial goals. If the ups/downs are too much for you to take, a more conservative portfolio may be appropriate.

US Stock Market Scorecard:

***"Routine" Declines (5%+ loss) happened 374x since 1900, occur 3.4x per year and last 39 days on average.

***"Moderate" Corrections (10% + loss) have happened 121x since 1900, occur 1.1x per year and last 105 days on average.

***"Severe" Corrections (15% + loss) have happened 60x since 1900, occur 0.5x per year and last 208 days on average.

***"Bear" Markets (20% + loss) have happened 32x since 1900, occur 0.3x per year and last 372 days on average.

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