Worst February since 1933

The Wall Street Journal has an article about the brutal start to 2009 (link).

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The Dow Jones Industrial Average dropped 119.15 points, or 1.7%, to end at 7062.93. The blue-chip benchmark ended down 937.93 points, or 11.72% on the month -- the worst percentage drop for February since 1933, when it fell 15.62%. The Dow industrials have fallen six months in a row and are now more than 50% off their record highs hit in October of 2007.
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Investor sentiment remains relatively complacent given this kind of tape action. The stock market tries to look ahead six months.

I like to tell the story about when my dad first started investing. The stock market was near a top in 1967, it went sideways for a while before spiraling down in 1973/74.

After losing 60% to 70% of his money, dad wanted to sell all his stocks and mutual funds near the bottom. My mom, who had been against the entire idea of investing in the first place, told my dad that he was an idiot. That after a 70% decline it wasn't time to sell, that it was time to buy. My dad ended up doubling his monthly mutual fund purchases. In hindsight, we all know things did turn out okay, and increasing the stock allocation was a smart move.

I'm not saying we are anywhere near a bottom. In fact, I don't think anything more than a short term trading bottom is close in price or in time. The stock market did recover from the 1974 lows, as it did in the 1930s. However, the ride was bumpy and had a lot of false starts before a new long term bull market came to Wall Street. There is also the case of Japan, where demographics and other factors might mean that their stock market may take another 50 years to reach their old 1980s bull market peak. The long run, might turn out to be very long here in the U. S. as well. No one knows for sure.

There are no guarantees in the stock market. Only a few lucky people will buy at the bottom. For the masses, age appropriate asset allocation, right sizing of positions, still seem the best way to go. I would like to believe that I am some kind of financial genius, but the record shows that I am not. For the average person, average results, or slightly above average, are a fine target.