Over the Long-haul the Stock Market Always Goes Up, Right?

We have all heard the statement many times, over many years, that even if the stock market takes a dive, it always goes up again.  The following graph, which plots the ups and downs of the stock market over a 100-year period seems to support this oft-repeated claim:

This illustration shows the market going up, experiencing some downs, then going up again and up some more, again.  Look at this growth!  It seems to prove the idea that the market always goes up.   However, your experience with the stock market would have been far different than what is illustrated in this graph if you had invested in the market in 1929, the year the stock market took the terrible crash that started the Great Depression. And you probably didn’t have money invested in 1943, or in 1975, either. But if you invested during any of these times, the market certainly wasn’t making tremendous gains and thus you would have had a hard time recovering any money you lost during a major downturn.
Now take a look at this same graph, which I have modified with hand-drawn lines indicating five periods when the market either took a dive or stayed the same, not making any gains:
 

If you had money invested during timeline “C,”  for instance, from 1929 until about 1955, a 26-year period, you would not have started to recover from everything you lost until 1955. That’s 26 years — more than half a working person’s life! This means it would not be likely that you would have had time to recoup any of your losses because during that long 26-year period, the market did not got up to the same level it had been before. Of course we don’t know what will happen to the market in the next two decades, but if your history matches any one of these five periods (A through E) on this graph, you will not grow your money.  Plus, inflation will erode your savings so that you will not only not earn any gains, but you may end up in the red!  Those who say the market always goes up also encourage you to invest in the stock market to solve the problem of inflation.  They say the market has averaged 10 percent growth and will always keep ahead of inflation.  But unfortunately, this isn’t the way it has worked out.  The graph looks good over a 100-year period, but you won’t be working and trying to accumulate savings and investments over 100 years. It doesn’t look so hot when you pick a 20- or 30-year period of time.
If you are planning to keep your money invested over the long-haul using the standard philosophy of “the market will always go up,” the odds are you will fail miserably.   Don’t you think 100 years is a long enough period of time to establish a trend?  Maybe not, but I think so.
Here’s my warning:  The market does not always go up during a shorter 20- or 30-year period and it’s those shorter periods that have the most personal impact for you.  We work and invest for 20 or 30 years then retire.  You don’t invest for 100 years.  Where will your money be on this graph over the next 1o or 2o years?  Will it always go up?  Don’t count on it — you take big risks with retirement funds by putting them all in the market.
Learn where to invest so you don’t lose money, keep ahead of inflation, reduce taxes, get a good growth and predict a strong income at retirement.  Contact me for help: peter@moneymastery.com or go to www.moneymastery.com.