What would it mean for the human race if stock markets suffered long-term losses?

parking_question_chap

I would be more concerned about what has caused this global crash, rather than the impact on company values.

zagfles

eskbanker wrote: »

Or, as this is something of an outlier when compared with other major indices, it should be regarded as supporting the rationale for diversification?

The UK stockmarket was lower in 1953 than it was in 1900.

short_butt_sweet

BrockStoker wrote: »

So what is the best way to protect against something akin to the great depression, if that kind of scenario were to happen again?


https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart

i think that chart ignores dividends, making it look a bit worse than it was.

Looking at the chart above, if you had invested in 1929, then you'd have to wait 20+ years for your investment to recover to it's initial value. The general advice is a minimum investment horizon of 10 years for equities, but in this case you'd be out of luck if you wanted your money back after 10 years, or 20.


Would it have helped much if your investment was more diversified than just investing in the DJI? My own plan up till now has been to hold some cash (to be able to buy in the dips, and help speed up the recovery of my investment value), but I've always avoided bonds/gilts.

globally diversified equities, rather than just one country/region, may well help.

also holding some cash or bonds may well help.

gilts might help more than cash, in that they often rise when equities are falling sharply, while cash is of course just static. though there's no guarantee that this will help overall in a long bear market.

does "buying in the dips" (by selling some cash or bonds) mean rebalancing (or even over-rebalancing ) according to a predetermined rule, or ad-hoc buying? ad-hoc may not work so well in a long bear market, because you may use up all your cash buying, and then the dips keep on coming.

What would you say to someone who is new to investing and worried about this kind of event even though they have a 20+ year investing horizon?

do follow the above ideas about holding globally diversified equities, and not being 100% equities, and rebalancing according to a plan.

and have more capital than you need, so it doesn't matter if you lose some of it

i realise the latter piece of advice is useless for people on a low income who can barely afford to pay into their workplace pension. but that's the nature of investing. over a period of several decades, there is a huge range of plausible outcomes (i.e. very low or very high returns). it works best for people who could live with very low returns, and regard average or very high returns as a nice bonus, not a necessity.

thor

zagfles wrote: »

The UK stockmarket was lower in 1953 than it was in 1900.

The ftse 100 is lower now than it was in 1999.

Thrugelmir

Alexland wrote: »

I was planning to buy the baked beans factory for myself and privately own it. I might not own it long if Ubx turns up with their AK 47.

That's probably one of the biggest risks in global equities - if a few of the best companies went private it would deprive the market of a substantial proportion of the returns.

Alex

Precisely why Warren Buffett owns it (indirectly). Highly automated , and cash generative. A simple business to run. Probably has an interest in the company which ships the raw material as well.

Thrugelmir

Economic wrote: »

The Japanese Nikkei 225 peaked on 29th December 1989, but the Japanese have survived and they don't have to eat baked beans. This should be a warning to those who think that stock markets can only go up.

You need to understand the financial crash that they suffered. Like the UK. They had the largest banks in the world (by balance sheet size) at the time. Equities rose in value for a reason. When the floor was taken away went into freefall.

Thrugelmir

thor wrote: »

The ftse 100 is lower now than it was in 1999.

Are the index constituents the same?

Thrugelmir

BrockStoker wrote: »

Looking at the chart above, if you had invested in 1929, then you'd have to wait 20+ years for your investment to recover to it's initial value.

They were troubled times around the world.