80 Year Anniversary of Black Tuesday

It's hard to believe, but it's been 80 years ago today that the Great Depression began, marking the worst economic down turn in more than 600 years.  The stock market slide that began, and didn't end until the bottom of the market during 1932-1933, wiped out the savings of millions of Americans and was exasperated by the fact that you could leverage stock positions 10-1 on margin in the days before the Federal Reserve kept margin at 2-1 or 3-1.  Although we've currently been in a recession that marks the worst period since the depression, it still pales in comparison to the havoc wrecked on our parents, grandparents, and great-grandparents generation.

The truth is that despite the fall in asset prices, those who paid cash for their purchases instead of borrowed money, spent less than they make, and continued to fully fund their 401(k) and Roth IRA, have emerged unscathed as long as they are at least ten years away from retirement.  The benefits of dollar cost averaging mean that investments made since the March low have nearly doubled.  With dividends reinvested, this helped lower your cost basis even further.  Of course, most critics of long-term investing ignore the fact that dividends aren't included in any charts, failing to realize the important research done by Dr. Jeremy Siegel that shows virtually 90% to 100% of real, after-inflation gains come from the power of reinvested dividends.

As you learned in Is It Better or Worse to Start Investing During a Recession, the market may go up, the market may go down, but there are always intelligent things to do.