A new bear market begins every 4.8 years on average.[i]
Since 1929 there have been 16 bear markets, where a bear market is described as a 20% or more decline.
The average bear market lasts 17 months and the time needed to recover from a bear market averages around 60 months.[ii]
Knowing these simple facts you can make some interesting deductions. If it takes an average of 60 months to recover from a bear market, and a new bear market begins every 57 months, that makes the possibility of earning a return on investment slim indeed.
For example, it took investors 65 months to break even after the 2008 crash and 87 months to break even after the 2000 dot.com fiasco.
It is these facts that have discouraged the American public from saving more money because the money they have saved and invested in 401ks, IRAs, Roths, etc., have not performed well enough to keep up with inflation, let alone out perform the market cycle.
Today it has become even more important to save where you are not directly affected by the convolutions of the market. As you can see from the data above, the odds are stacked against you in a buy and hold investment strategy.
Which brings up another fact. If buy and hold is not a viable option due to the facts mentioned above, then perhaps frequent changes in your portfolio would be a good option to exercise. But picking the market highs and lows is an art form that few people have mastered. Besides, each time you change your portfolio you will pay a fee that will eat away at your profits. It has been documented multiple times now that Steve Forbes and Jack Bogle, to name just two, have gone on record showing how those “little” 2% fees can steal between 60% and 80% of your profits over your lifetime.
The more sustainable option for you today is to look for guaranteed contracts and dividend participation as a way of offsetting this negative circumstance of market corrections. With guarantees you never give up what you have gained and therefore you never have to worry about how long it will take you to recover from a market correction.
Aesop said it well years ago when he told the story about Hare and the Tortoise. “Slow and steady wins the race.” And that is what guaranteed contracts and dividends are, slow and steady growth providing stability and security in a volatile market place.