2020 and 2022 were not significant crashes. 2020 was literally the shortest decline in stock market history.There were two significant crashes in 2020 and 2022. Given this, it doesn't make sense to say that investors now a days don't know what it's like to live through a crash compared to investors around in the dot com and Great Recession times. The fact that these two crashes are frequently ignored would indicate some level of irrationality.
If you believe that you were tested in 2020 and 2022, you are going to make serious mistakes in gauging your risk tolerance. Yes, I really worry that young investors learned the wrong lesson from these declines. Stock market crashes lasting less than a year are not typical.
2020 was literally the shortest decline in stock market history.
It wasn't just the number -50%. 2008-2009 saw the near-collapse or actual collapse of at least ten major institutions. Some were bailed out, some retained the same names but underwent fundamental transformations. Bear Stearns. Fannie Mae and Freddie Mac. IndyMac. LEHMAN BROTHERS.. AIG. Reserve Primary money market fund. Goldman Sachs and Morgan Stanley's investment banking operations. Washington Mutual. Wachovia. GM and Chrysler bailouts.
Some of us remember Jim Cramer hollering "NO, NO, NO. Bear Stearns is FINE. Bear Stearns is NOT IN TROUBLE. Don't move your money from Bear! That's being SILLY!" That was on March 11th. By March 16th the stock had dropped -96%.
Nothing like that happened in 2020 or 2022.
In Morningstar's scoring, which is inflation adjusted and includes dividends, 2000-2013 is scored the second worst in history. 2020 and 2022 rank only eighteenth- and twenty-first worst. They treated 2000-2013 as a single event because, inflation adjusted, the stock market did not recovery by 2007. But If they'd separated out 2008-2009 I think it would still have ranked something like #5.
[https://www.morningstar.com/portfolios/ ... -downturns]Source[/url]
Statistics: Posted by nisiprius — Sun Sep 15, 2024 10:51 am