Ten thousand dollars invested in the stock market in 1934 would have been worth $21 million in 2007, but there’s always a reason to stay out of the market, as Todd Sullivan demonstrates with his chat “74 Reasons Why People Did Not Invest in the Stock Market”.
A few of the reasons are a stretch, like Eisenhower getting sick or the Newark Race Riots. They may have been important events, but it would be surprising if someone put money under their mattress specifically because of them. Even so, the litany of war, political uncertainty, and financial setbacks is impressive, and when nothing’s going wrong people really may have stayed out of what they deemed to be an overbought market. And in case you’re wondering, the real value of 10,000 1934 dollars would have been a bit over $100,000 in 2007, so you can’t just call it inflation. Sullivan used the S&P 500 (INDEXSP:.INX) to calculate how much money would be made, which is as good a stand-in for US stocks as any.
A 74-year time span is a little longer than most of us are interested in, but it makes a strong historical argument: if you can stay in the market long enough to get through the downturns, recoveries will more than make up for them. Waiting for the right time to enter the market makes sense up to a point, but if you let every crisis of the moment dissuade you from investing you may end up passing on a lot of value.
Investing in equities is always a good long-term strategy
Of course it’s hard not to notice that the growth is sandwiched in between the Great Depression (it covers the final bit, but not the crash) and the Great Recession, and plenty of people got wiped out in both events. Just because the economy rebounded doesn’t mean that each investor was individually made whole. A cynic might say that instead of proving that investing in equities is always a good long-term strategy, this chart just covers a period of explosive growth in the US, with the two events that show just how risky equities real are conveniently left off.