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Coming out of the Great Depression, our nation experienced 5 years of what could be called nothing less than a booming recovery. From 1932-1937, the market averaged a whopping 38.7% annualized return based on the chart shown here.
Then things slowed down. For the next 12 years, 1937-1949, virtually nothing happened. Average loss over this time period was -.8%. You weren't losing very much but, you weren't making much. Dissapointing but livable to those with memories of the Depression still pretty fresh in their minds.
Then the worm turned. From 1949-1968, the average annualized return was 15.3% per year. Here we go, boys and girls!!!
Then the unthinkable happened...the beginning of what looked like a bear market. Not willing to let people flounder and panic, and realizing that the planning needs of families were becoming more and more complex, a group of 13 individuals, led by Loren Dunton, met in the Chicago O'Hare airport and laid the groundwork for the Society for Financial Counseling. This led to the formation of the College for Financial Planning which produced it's first graduating class in 1973.
1974 was a pretty bad year and these fledgling graduates had to find a way to reassure their clients that things were going to be okay. But as things continued to stay the same, many were getting restless. They weren't seeing the results that they had gotten all by themselves without the help of these "professionals" In fact, from 1968-1982, the market returned an average of -3%.
Not sure what to do, we had to start talking about staying the course...over the long term the market averages x%...etc... The only reassurance left now was rules of thumb. Rules of thumb are going to be a big topic in future posts but this one is getting a little long. In fact, up next, I'll be talking about long-term averages, and rules of thumb.
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