Market’s long-term rewards potentially “staggering”
As the market continues to fall, those investors who are taking the opportunity to buy are likely to be amply rewarded in the years ahead. That’s the reminder from Larry MacDonald of Canadian Business, who recently offered the following quote from William Bernstein’s book The Four Pillars of Investing:
The rewards of fishing in such troubled waters are staggering. For the 20 years following the 1932 bottom, the market returned 15.4% annually, and for the 20 years following the 1974 bottom, 15.1% annually.
While no one knows where or when the exact bottom will occur, being early (or late) by 10% or 20% pales in significance to the potential upside rewards of a 15% annual return over 20 years. To put it in perspective, an initial $10,000 investment earning 15% compounded annually grows to $163,665 after 20 years; in comparison, a 10% annual compounded return on $10,000 only grows to $67,275.
Of course there’s no guarantee that we’ll get a repeat of the market’s performance following the 1932 and 1974 bear market bottoms over the next 20 years. But investing, like most everything else, is about probabilities – not certainties – and they’re looking better all the time.
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S&P 500’s worst decade ever
Trader mentality run amok?
