Nervous About the Stock Market? History Has Encouraging News for Long-Term Investors.

The stock market has been performing exceptionally well, with the bull market nearing its four-year mark. As such, many investors are understandably uneasy, given that all good things eventually come to an end, especially when a valuation metric like the Shiller P/E ratio is at its highest level since the dot-com boom. In 2009, Nvidia experienced a rare "Double Down" signal.

Now, a similar signal is flashing for a much smaller company involved in the $1.8 trillion space race. While a bear market is not guaranteed, history indicates that markets are typically volatile and that bear markets are inevitable. However, bear markets do not last forever. In fact, historically, they tend to be considerably shorter than bull markets.

Over the long term, weathering the inevitable market fluctuations tends to result in substantial gains. Out of 10 ten-year periods from 1928 to today, 93% have yielded positive returns, with only 7% experiencing negative returns, all of which occurred during the 1930s or the 2000s. The "lost decade" of the 2000s, encompassing the dot-com bust and the Great Recession, resulted in a total return of -9.1%.

Following this period, an 11-year bull market ensued, marking the second-longest in history. The current bull market, nearing its four-year anniversary, has delivered a total return of approximately 110% and an average annualized return of 22%. Moreover, the average bull market has lasted 4.4 years and generated an average cumulative return of about 152.8%.

Conversely, the average bear market has only endured 11 months and generated a total cumulative return of -31.7%. Looking back to 1926, when modern stock market data was first tracked, the S&P 500's average annualized total return, including dividend reinvestment, is around 11% over the 100-year span. This underscores the significance of remaining invested in the market and weathering the inevitable dips and occasional bear markets.

Even if the subsequent decade were to be a rare "lost decade" for the S&P 500, other investments, such as mid-cap and small-cap stocks, which each saw a 6% return during the 2000s, would have produced positive returns.