Is now a once in a generation opportunity to invest, given the recent market falls?
Just one month ago, in late February, the US S&P500 and Nasdaq hit record highs, despite the fact that the coronavirus was getting worse.
As I mentioned before, markets went up during the Spanish Flu Influenza of 1918-1920, despite there being a world war on top of the virus.
The same thing happened during HIV and various other pandemics.
This time, stock markets have reacted to the government shutdowns of large parts of the economy, which didn’t happen in 1918-1920.
What do we know from past experience?
- The average bear market doesn’t last long as per the stats below. Even during 2008, it took markets 3 years to recover from the falls:
- Markets have always recovered for over 100 years in the US and UK, despite countless previous huge falls.
- Anybody buying at these levels has tended to get high returns in the subsequent 5 years. For instance, in the 5 years after 2008, investors in the S&P500 got about 15.80%.
- Most successful investors, including Warren Buffett, advocate taking advantage of market falls.
The past is no definitive guide to future investment returns. A long-term investor though should see themselves as a collector.
Cheaper prices are good for net buyers (those not in retirement). Market falls are bad for net sellers (retirees who have to sell to fund their lifestyle).
For anybody with a 10 year+ time horizon, these valuations represent an excellent opportunity.
