Over the five years following the COVID-19 pandemic, the stock market experienced sharp declines followed by recoveries. Analysis of five major market collapses over the past 150 years illustrates the fluctuations in investment value:
World War I and the Influenza Pandemic: In 1914, a $100 investment fell to $49 before recovering.
The Great Depression of 1929: A $100 investment dropped to $21, taking more than four years to recover.
The Great Depression and World War II: Policy shifts and war effects led to a drop to $52 in 1938, with recovery in 1945.
Inflation, Vietnam, and Watergate: A 51.9% decline saw a $100 investment fall to $48, with a recovery period of over nine years.
The Lost Decade: The dot-com bubble and financial crisis reduced a $100 investment to $52.
Opinion
Historically, stock markets have experienced sharp declines due to wars, economic crises, and political instability. However, from a long-term perspective, the market has always rebounded and eventually risen. Rather than abandoning investments amid short-term volatility, it is wise to maintain a diversified investment strategy that suits your risk tolerance and time horizon. Instead of selling assets out of fear during market collapses, these moments can be seen as opportunities to buy at lower prices. Above all, a patient, long-term perspective is the key to successful investing—as evidenced by over 150 years of market history, which shows that despite temporary shocks, the stock market ultimately recovers and rewards persistent investors.
Core Sell Point
Sticking to a consistent, diversified long-term investment strategy without being swayed by short-term market volatility is the prudent approach to overcoming the shocks of market collapses and achieving solid investment performance.
Five Years After the COVID Shock: Investment Lessons from Historical Market Collapses
In the five years following the COVID-19 pandemic, the stock market has experienced dramatic declines followed by remarkable recoveries. While the plunge in March 2020 rebounded almost immediately, the downturn at the end of 2021 was deeper and more prolonged. What lessons can we learn from these recent market collapses?
Long-Term Rewards Amid Uncertainty
The timing of market recoveries is unpredictable.
Investors who avoid panic selling during market collapses are rewarded over the long term.
Markets always recover and eventually reach new highs.
Lessons from 5 Major Market Collapses Over the Past 150 Years
Let’s examine the fluctuations in investment value through five of the most severe market collapses over the past 150 years:
World War I and the Influenza Pandemic: After peaking in 1911, the market began to decline, a trend that worsened with the outbreak of World War I in 1914. A $100 investment fell to $49 before recovering.
The Great Depression of 1929: A $100 investment plunged to $21 by 1932. Excessive economic exuberance led to a collapse that took more than four years to recover.
The Great Depression and World War II: After recovering to 1929 levels in 1936, the market fell again. Due to shifts in Roosevelt’s policies and the impacts of World War II, a $100 investment dropped to $52 in 1938 before recovering in 1945.
Inflation, the Vietnam War, and Watergate: Political uncertainty and OPEC’s oil embargo caused a 51.9% decline. A $100 investment fell to $48 and took over nine years to recover.
The Lost Decade (Dot-com Bubble & Financial Crisis): The dot-com crash reduced a $100 investment to $52, which was then further eroded by the subsequent housing bubble collapse and financial crisis.
Long-Term Investing Shines Through Volatility
An investment of $100 made in the early 2000s would have grown to over $300 by January 2025. Had that $100 been invested in 1870, its value today would be approximately $3,125,500.
Lessons on How to Cope with Market Volatility
Markets with high volatility are still worth enduring.
Market collapses are always frightening, but recovery is inevitable.
Construct a well-diversified portfolio that aligns with your investment style and time horizon.
Investors who maintain a long-term perspective will ultimately be rewarded.
In conclusion, while market collapses are inevitable, history has proven that markets always recover. The key to successful investing is to avoid succumbing to fear during downturns and to maintain a long-term perspective.
