If any of us needed further confirmation that things are bad out there, we got the signal right before the July 4 holiday -- the markets officially dipped into bear-market territory. The Dow Jones Industrial Average, Nasdaq Composite, and the S&P 500 Index are all down more than 20% from last fall's highs.
A lot of investors have lost a good chunk of their portfolio since those highs. And with a black cloud hanging over the financial sector, home values continuing to plummet, and gas prices resting comfortably above $4/gallon, the economic outlook is murky at best.
No one will deny that seeing the market fall 20% or more is unsettling. But if you're a truly long-term investor, does it really matter?
The market has endured bear markets before -- 33 of them since the Dow Jones Industrial Average was created. Since 1896, then, the market has dropped more than 20% on 33 separate occasions -- and each time, it recovered to reach new highs.
Sure, the length of time it took the market to recover those losses varied, but in most cases, the year or two directly following the end of the bear market saw a considerable jump in average share prices.
[Then again, the times it didn't jump back in a year or two were the ones that really hurt.]
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