The Other Market Bottom

We’ve come a long way in the last year.  The stock market bottomed on March 23rd, and since then, stocks have soared, with value stocks (and small cap value stocks in particular) leading the way.  The chart below from Morningstar shows us that every $10,000 you had invested in the DFA US Large Value Fund (DFLVX) last year has grown to $19,112, almost doubling.  In the DFA US Small Value Fund (DFSVX), that $10k has more than doubled and is now worth $24,665!

This recent stock surge has probably caused you to forget about another, more substantial recovery that has been going for much longer.  The 2007-2009 bear market, the worst decline for stocks since The Great Depression, ended 12 years ago today, on March 9th, 2009.  That means we can look at how the longer-term recovery has impacted stock prices.

Incredibly, $10,000 invested in the DFA US Large Value Fund (DFLVX) grew to $72,780, and that same $10k in the DFA US Small Value Fund (DFSVX) grew to $73,529.  It would have been painful to see about half of your assets temporarily disappear in the 2007-2009 downturn, but the lasting damage from the bear market was the pressure it put on short-sighted investors to sell their stocks and wind up missing some or all of the ensuing recovery.  While a temporary decline of -55% or so is obviously painful, missing out on the chance for your assets to grow seven-fold over the following 12 years is far more detrimental to your financial wellbeing.

While strong stock returns over the last year are attracting the most headlines, long-term investors would be well served to remember the 2007-2009 experience and the stratospheric returns we’ve seen since.  Your job as an investor is not to avoid bear markets, but to ensure you don’t miss out on the eventual recoveries that always last longer and are incredibly lucrative.  

No matter the circumstances or how severe the decline, the most successful investors–with the help of their financial advisor–are able to stay the course with their portfolios and maintain the confidence that the eventual recovery will be swift and substantial.


Past performance is not a guarantee of future results. Index and mutual fund performance includes reinvestment of dividends and other earnings but does not reflect the deduction of investment advisory fees or other expenses except where noted. This content is provided for informational purposes and should not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services.