Market declines — A little history
Stock market declines are a natural part of investing, but they’re also the last things most investors want to experience. Here is some historical background to help you put market declines in perspective.
Types and frequency of stock market declines
Declines have varied widely in intensity, length and frequency. While in the midst of one, it’s been nearly impossible to tell if you’re seeing a slight dip in the market or the beginning of a more prolonged correction.
The table below shows how frequently declines in the Dow Jones Industrial Average have occurred since 1900. As you can see, while declines have varied widely in intensity, length and frequency, they have also been somewhat regular events.
A history of declines
(1900 – December 2009)
| Type of decline | Average frequency1 | Average length2 | Last occurrence | Last occurrence pre-March 2009 |
|---|---|---|---|---|
| -5% or more | About 3 times a year | 48 days | March 2009 | March 2008 |
| -10% or more | About once a year | 115 days | March 2009 | March 2008 |
| -15% or more | About once every 2 years | 217 days | March 2009 | March 2008 |
| -20% or more | About once every 3-1/2 years | 338 days | March 2009 | October 2002 |
Source: The unmanaged Dow Jones Industrial Average
- 1
- Assumes 50% recovery of lost value
- 2
- Measures market high to market low
Investing in a volatile market
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Three lessons from market declines
Past market declines can provide meaningful lessons and perspective.
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Strategies for dealing with market volatility
Don’t forget the fundamental principles of investing, especially during difficult times.
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Recessions: keeping your perspective
We’re in the midst of the 14th recession since 1931. See the timing and duration of the first 13.
Return to topInvestors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s summary prospectus and prospectus, which can be obtained from your plan’s financial professional or downloaded and should be read carefully before investing.