On average, the deeper the market decline, the longer it takes to recover. The market frequently endures small declines that are brief and quickly retrace to breakeven. For example, a 5% decline historically averages just 47 days in length when measured from peak to trough.¹ Additionally, the greater the loss, the larger the gain needed to recover and break even. While a 10% loss requires an 11% gain to break even, a 50% loss requires a 100% gain to recover.
Bear market declines occur less frequently, yet are far more severe and potentially damaging to investor portfolios. The two bear markets of the 2000s averaged a decline of 52% and took 3 ½ years to recover.³ Eleven bear markets have occurred since 1950 — an average occurrence of once every six years. Such multi-year market declines stop investment compounding. The years spent holding equities during decline and recovery periods can have a devastating impact on cumulative investment performance.
Graph of hypothetical investment in the S&P 500 Total Return Index from 1/1/1990 – 12/31/2013 and assumes reinvestment of dividends. The referenced indices are shown for general market comparisons and are not meant to represent the Fund. Investors cannot directly invest in an index.
Source: Graph created by Lyons Wealth Management with Zephyr StyleADVISOR using data from www.standardandpoors.com