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May 24, 2012
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Michael Muskal: 'Pro-choice' position hits record low, according to poll
Chris Farrell: Are We in a Tech Bubble?
The Kosher Gourmet by Penelope Wall: PHILLY CHEESE STEAKS --- hold the steak!
May 23, 2012
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Mary Beth Franklin: How to Choose the Right Annuity for You
Tina Susman: The wig wasn't enough: Man gets 13 years for posing as his dead mom
The Kosher Gourmet by Emma Christensen:A simple way to do fish right
May 22, 2012
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Thomas M. Anderson: Walking Away From a Mortgage
The Kosher Gourmet by Megan Gordon: Enjoy a celebration of the most rich and layered flavors: Black bean, sweet potato and quinoa chili
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Chris Farrell : Earn Dividends in Emerging Markets with This WisdomTree ETF
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Guy Jackson : Victim's father regrets death of Lockerbie bomber
The Kosher Gourmet by Mario Batali: Famed chef's veal shoulder farsumagru: A festive meat course for late spring
May 18, 2012
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Steven Goldberg: 5 Great Stock Picks and the Exchange-Traded Fund that Owns Them
Mary Pickett, M.D.: Ask the Harvard Experts: Don't be forced into gluten-free lifestyle based merely on a doctor's false-positive test
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May 17, 2012
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May 16, 2012
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May 15, 2012
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May 14, 2012
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May 11, 2012
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May 10, 2012
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Sharon Palmer, R.D. How you can reduce your risk -- or delay -- chronic diseases associated with aging
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Jewish World Review
Oct. 27, 2008
/ 28 Tishrei 5769
Investors can bounce back from even the worst of times
By
Gail Marks Jarvis
http://www.JewishWorldReview.com | (MCT)
Let's deal with your worst fantasies: The "D" word.
Some people have bandied it about - the prospect that perhaps this is the big one, the 100-year-flood in the stock market, or another depression.
Most market observers don't feel that way. Certainly Federal Reserve Chairman Ben Bernanke, who is an expert on the Great Depression, is inventing new ways to fight the current financial crisis.
Still, there is fear in the air. People are watching hard-earned savings bleed away in their 401(k)'s.
But consider the worst period in history from an investor's perspective. The idea is not to say it will happen, but to provide a glimpse of the cruelest time U.S. investors have ever experienced to show that most did recover - and, depending on how long they were invested, could eventually have had remarkable gains.
It shows why financial advisers tell young investors to relax, because they have years to recover from early losses in the stock market.
It also shows that people in retirement, or close to retirement, are the ones who need to be cautious with their investments.
If you were 55 years old just before the stock market crashed in 1929, and had been rich enough to put $10,000 into the stock market while stocks seemed promising, you would have been in sorry shape by the time you planned to retire 10 years later.
After an 83 percent decline in the stock market by 1932, you would have recovered some of your money by retirement, but not all of it. You might have found the 10 years after the market crash to be torture, with downturns erasing the upturns. And on your retirement date, you would have had just $6,020 for your nest egg, according to market data tracked by Ibbotson Associates, a Chicago-based research firm.
But what if - before the crash - the 55-year-old had invested instead in the moderately conservative portfolio financial advisers often suggest for people approaching retirement age? If, at the peak of the stock market, the 55-year-old put 60 percent of his $10,000 investment into the stock market - measured by the Standard & Poor's 500 index - and the remaining 40 percent in U.S. government bonds, the investor would have recovered his entire $10,000 by retirement at age 65, winding up with $10,208, according to Ibbotson.
It took an investor who invested in the stock market alone just before the 1929 crash 13 years to recover all that was lost. That, of course, was unusual: On average, investors in the stock market have come out even 2 ½ years after bear markets.
Waiting 13 years sounds like a fearsome amount of time - enough, perhaps, to send some baby boomers into a flight to safety.
But consider the person who was 45 just before the market crashed in 1929. If that person had invested $10,000 in the stock market, by retirement at 65 he would have recovered everything lost, and then some. The investor would have gone into retirement with roughly $14,539, according to Ibbotson. And if instead of stocks alone, the 45-year-old had chosen a moderate-risk portfolio of 60 percent in stocks and 40 percent in bonds, the sum at retirement would have been $20,123 - more than double the original investment.
But what about younger investors?
A 35-year-old named Linda contacted me this week, terrified because she had lost $4,000 in her 401(k) and envisioned losing everything. But consider the 35-year-old who invested $10,000 in the stock market just before the crash of '29. By the time retirement rolled around 30 years later, the 83 percent loss in the Depression would have become a distant memory: The person would have seen his crippled funds grow to $95,144.
A 25-year-old before the crash of 1929 would have fared even better. Her original $10,000 investment would have ended up being $210,344 by retirement.
Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.
Gail Marks Jarvis is a personal finance columnist for the Chicago Tribune and author of "Saving for Retirement without Living Like a Pauper or Winning the Lottery." Comment by clicking here.
Previously:
10/20/08: Want to sell? Look at 401(k), but don't leap
10/16/08: Want to be like Buffett? There are ways
09/29/08: Money protection only goes so far, so know the risks
08/26/08: Retail stocks may not be best fit for investors
08/20/08: Rear-view mirror investing can be dangerous to a portfolio
07/01/08: What do we do? My daughter didn't get a scholarship
02/25/08: Before abandoning your mutual fund
02/14/08: Dirty little secret of some funds may be haunting
01/29/08: Sorting out the stock market
01/03/08: One word for 2008 crystal-ball gazers: Caution
12/11/07: Buy and hold isn't necessarily tried and true
11/26/07: Translating the falling dollar's implications for investors
11/13/07: Gradual retirement may not be key to happiness
11/05/07: Rate cut won't offer immunity to investors
10/29/07: Employers set to help workers save in 401(k) accounts
10/22/07: Playing bounce may be costly to stock investors
10/10/07: Investors find boring often can be fruitful
10/01/07: Make up lost time with swift, smart action
09/24/07: Balance is key for investing by retirees
09/18/07: Homeowners who wait see options fade
09/04/07: Easy matter to rate fund's performance
08/27/07: Mortgage mess could be good for savers
08/17/07: Small stocks are coming with large caveats
© 2007, Chicago Tribune Distributed by McClatchy-Tribune Information Services
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