The recent bear market has been particularly painful for stocks investors, beginning only five years after the vicious 2000-2002 bear market. For the ten years ending last December, stocks have offered a negative 3.15 per cent real return for US investors, constituting the fourth worse ten year period since 1871. This had led many to question whether the mantra “Stocks for the Long Run,” is still right for investors.

But a look at history shows that recent experience is not uncommon and excellent returns are available to those who survive such rough patches. Since 1871, the three worst ten-year returns for stocks have ended in the years 1974, 1920, and 1978. These were followed, respectively, by real, after-inflation stock returns of more than 8 per cent, 13 per cent, and 9 per cent over next ten years. In fact for the 13 ten-year periods of negative returns stocks have suffered since 1871, the next ten years gave investors real returns that averaged over 10 per cent per year. This return has far exceeded the average 6.66 per cent real return in all ten years periods, and is twice the return offered by long-term government bonds.