Case in point: I sold all my stocks in the mid 1970s while the dow was in a 10 year flirtation with 1,000. Or, in other terms, essentially flat for a decade.
So, IF someone bought in '65 - '68 and held for 10 years (and buy and hold is considered long term safe) they would have LOST money due to the dow holding steady while inflation didn't.
I am under the impression that one economic cycle = 30 years, not 10. Also when people said buy and hold is the best strategy, they actually meant "continue buying until you retire", not "buy once then sell them after 10 years because they are flat".
Case to the point, Even if you are in Japan which experienced 30 years of depression. You should still have significant gain if you continue to buy, even if you entered the market at peak in 1990.
In 1990 Nikkei 225 index peaked at 37189, then it continue to decline in the next 20 years, it finally come back up after 30 years and it's currently at 39785.
I asked AI to do a calculation on investment gain if you invest $1000 a month every month from 1990-2025. Here is the calculation:
Total invested: $427k
Gain: $673k-873k
Total portfolio:1.1m-1.3m
Average annual return: 5.5-6.5%
(Considering Japan had
deflation from 1990-2013, this performance actually beats it)
I believe I made it super clear that you have to start building portfolio when you are young because economic cycle is 30 year long. But all the back testing and data shows if you continue to buy for 30 years, even in the worst case like Japan it still give you 5-6.5% annual return.
If you invest once before economic stagnation and don't keep buying the dip until the 30 year cycle is complete, of course there will be a chance that you don't gain anything. You aren't even following this strategy correctly. >.>
I am very well aware of how the whole thing works.
And if you graduate with a STEM degree during an economic downturn you are financially ****ed for the rest of your life
How long can economic downturn last, compare with one individual's average life span?
If you graduate at 22 and retire at 65. You have
43 years to make that money back.
Which economic downturn in the US history last 43 years? I don't know, you tell me.