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Getting Even

The market took your money. How long will it take to get it back?

Bear markets can do ugly things to mutual fund portfolios. But once they've past, recouping the losses doesn't necessarily take forever.

One of these days, the trend lines of the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 are going to turn upward, and when they do, the question on everyone's minds will be, How long is it going to take to get back to even and recoup my fund's losses?

Because everyone's portfolio holdings are different, there's no one answer to that question. But to give you a sense of how much time it takes to make money after the chips have been down for a while, I asked Ibbotson Associates, a Chicago-based securities research company, to do the math on this hypothetical question: How long would it take for an equity fund to get back to even if it were down 20 percent for two back-to-back years, then, for the next 10 years, moved ahead at an average annual total return of 8 percent?

And the answer is, drumroll please: about six years. The loss in the example falls within the range of previous bear markets. Historically, the biggest bear market loss, a result of the crash that began in October 1929, was down 83.4 percent.

If you're trying to calculate how long it will take for your funds to recapture their paper losses, keep in mind the following: In good times or bad, making money takes time and patience.


Dian Vujovich is an author, syndicated columnist and publisher of fund investing site www.fundfreebies.com.

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This article was originally published in the November 2002 print edition of Entrepreneur with the headline: Getting Even.

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