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Now is a fine time for a youngster to start investing in the market.
Ideal to go with low-cost mutual funds from companies like Fidelity
or Vanngard.
This is an excerpt that I could cut and paste. Go to the
citation to properly see the charts and graphs.

from https://www.morningstar.com/economy/what-weve-learned-150-years-stock-market-crashes

What We’ve Learned From 150 Years of Stock Market Crashes
Though they varied in length and severity, the market always recovered
and went on to new highs.


Emelia Fredlick
Mar 6, 2025

Share
Line chart showing market performance over time, highlighting events
like the "Lost Decade," "COVID-19 Pandemic," and "Ukraine, Inflation, & Shortages." Final values in Jan. 2025 are $31,255 (red) and $31,366 (blue). This month marks five years since the covid market downturn.

Though the initial downturn on March 9, 2020, was dramatic—the US stock market lost nearly 8% in one day—the US stock market ultimately
recovered from that crash in just four months, making it the fastest
recovery of any market crash over the past 150 years.

Not even two years later, the stock market experienced a worse downturn:
The market took 4 times as long (18 months) to recover from the crash of December 2021, spurred by the Russia-Ukraine war, intense inflation, and
supply shortages.

So, with these recent market crashes behind us, what have we learned?

It’s impossible to predict how long a stock market recovery will take.
If you don’t panic and sell your stock holdings when the market crashes,
you will be rewarded in the long run.
The covid crash and the Ukraine/inflation downturn may be the freshest memories, but these lessons also ring true when it comes to all other historical market crashes: Though they had varying lengths and levels of severity, the market always recovered and went on to new highs.

Here’s what we’ve learned from the market declines of the past 150 years.

How Frequent Are Market Crashes?
The number of market crashes depends on how far back we go in history
and how we identify them.

Here, we turn to data that former Morningstar Director of Research Paul
Kaplan compiled for the book Insights into the Global Financial Crisis. Kaplan’s data includes monthly US stock market returns going back to
January 1886 and annual returns over the period from 1871-1885.

In the chart below, each bear-market episode is indicated with a
horizontal line, which starts at the episode’s peak cumulative value and
ends when the cumulative value recovers to the previous peak. (Note that
we use the term “market crash” interchangeably with bear market, which
is generally defined as a decline of 20% or more.)

1870
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
2020
1
10
100
1,000
10,000
$100,000
$31,366
$31,255
Cumulative Real Wealth1949$87
Cumulative Real Wealth1949$87
Lost Decade
Black Monday
Inflationary Bear Market
Inflation, Vietnam, & Watergate
Height of Cold War & Cuban Missile Crisis
Postwar Bear Market
Great Depression & WWII
1929 Crash & Great Depression
WWI & Influenza
Enforcement of Sherman Act
Panic of 1907
Rich Man's Panic
Cornering of Northern Pacific
Outbre

When you incorporate the effect of inflation, one dollar (in 1870 US
dollars) invested in a hypothetical US stock market index in 1871 would
have grown to $31,255 by the end of January 2025.

The substantial growth of that $1 highlights the enormous benefits of
staying invested for the long term.

Still, it was far from a steady increase over that period. There were 19
market crashes along the way, with varying levels of severity. Some of
the most severe market crashes have included:

The Great Depression, which began with the crash of 1929. This 79% stock
market loss was the worst drop of the past 150 years.
The Lost Decade, which included both the dot-com bubble burst and the
Great Recession. Though the market began recovering after the dot-com
bubble burst, it didn’t climb back to its previous level before the
crash of 2007-09. It didn’t reach that level until May 2013—more than 12 years after the initial crash. This period, the second-worst drop of the
past 150 years, ultimately included a stock market loss of 54%.
Inflation, Vietnam, and Watergate, which began in early 1973 and
ultimately led to a stock market decline of 51.9%. Factors that
contributed to this bear market include civil unrest related to the war
in Vietnam and the Watergate scandal, in addition to high inflation from
the OPEC oil embargo. This market downturn is particularly relevant to today’s environment, given issues like the recent inflation surge and
the Russia-Ukraine and Israel-Hamas wars.
These examples demonstrate the frequency of market crashes. Though these
events are significant at the moment, they are indeed regularly
occurring events that happen approximately once a decade.

What does this history tell us about navigating volatile markets?
Mainly, that they’re worth navigating.

How to Measure the Pain of a Market Crash
How do you evaluate a market crash’s severity? That’s what Kaplan’s “pain index” measures. This framework considers both the degree of the decline and how long it took to get back to the prior level of
cumulative value.

Here’s how it works: The pain index is the ratio of the area between the cumulative value line and the peak-to-recovery line, compared with that
area for the worst market decline since 1870. That is, the crash of
1929/first part of the Great Depression has a pain index of 100%, and
the other market crashes’ percentages represent how closely they matched
that level of severity.

For example, consider that the market suffered a 22.8% drop around the
Cuban missile crisis. The crash of 1929 led to a 79% drop, which is 3.5
times greater. That’s already significant, but also consider that the
market took four and a half years to recover after that trough, while it
took less than a year to recover after the trough of the Cuban missile
crisis. So, taking this time frame into account, the pain index conveys
that the first part of the Great Depression was 28.2 times worse than
the Cuban missile crisis downturn.

The table below lists the bear markets of the past 150 years, sorted by
the severity of market decline, and including its pain index.

Largest Real Declines in US Stock Market History
Table showing the dates, percent decline, and pain index for the largest
real declines in US stock market history.
Table with 8 columns and 19 rows.
Decline Rank Decline (%) Peak Trough Recovery Pain Rank Pain Index (%)
Event(s)
1 79.0 Aug 1929 May 1932 Nov 1936 1 100.0 1929 Crash & Great Depression
2 54.0 Aug 2000 Feb 2009 May 2013 3 85.5 Lost Decade (Dot-Com Bust &
Global Financial Crisis)
3 51.9 Dec 1972 Sep 1974 Jun 1983 4 80.4 Inflation, Vietnam, & Watergate
4 51.0 Jun 1911 Dec 1920 Dec 1924 2 89.3 WWI & Influenza
5 49.9 Feb 1937 Mar 1938 Feb 1945 5 59.6 Great Depression & WWII
6 37.2 May 1946 Feb 1948 Oct 1950 6 29.1 Postwar Bear Market
7 35.5 Nov 1968 Jun 1970 Nov 1972 7 14.2 Inflationary Bear Market
8 34.2 Jan 1906 Oct 1907 Aug 1908 9 8.2 Panic of 1907
9 30.4 Apr 1899 Jun 1900 Mar 1901 10 8.2 Cornering of Northern Pacific Stock
10 30.2 Aug 1987 Nov 1987 Jul 1989 11 7.7 Black Monday
11 28.5 Dec 2021 Sep 2022 Mar 2024 8 8.4 Ukraine, Rise of Inflation, &
Shortages
12 27.3 Oct 1892 Jul 1893 Mar 1894 17 3.1 Silver Agitation
13 22.8 Dec 1961 Jun 1962 Apr 1963 15 3.6 Height of Cold War & Cuban
Missile Crisis
14 22.0 Nov 1886 Mar 1888 May 1889 12 6.3 Depression & Railroad Strikes
15 21.7 Apr 1903 Sep 1903 Nov 1904 13 5.0 Rich Man's Panic
16 21.1 Aug 1897 Mar 1898 Aug 1898 16 3.2 Outbreak of Boer War
17 20.5 Sep 1909 Jul 1910 Feb 1911 18 3.1 Enforcement of Sherman
Antitrust Act
18 20.1 May 1890 Jul 1891 Feb 1892 14 4.8 Baring Brothers Crisis
19 19.6 Dec 2019 Mar 2020 Jul 2020 20 0.9 COVID-19 Pandemic

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