The US basically had three consecutive 50% losses in '30, '31, '32 for a total near 90%.
No, it did not. Why would you make such an easily falsifiable claim? NONE of those three years reached 50%, though one of them was close, and the aggregate over that three year period was -61%, not -90%.
Lyin Radagast says market lost 50% three consecutive years, which is 87.5%. Actually it lost 89.2%! NOT THE SAME! He said it started in 1930 and ended in 1932. Actually 1929/9/3 to 1932/7/8! Wrong!!!!!!! Falsifiable News! #MakeDataGreatAgain
Maybe you're ignoring the ~6 to 9% dividend yields that paid out in those years?
I recently noticed that most people only seem to care about price, and only measure against the tippity top top. https://forum.mrmoneymustache.com/welcome-to-the-forum/share-the-love-a-fraternal-hug-for-those-who's-stashes-are-hurting/
I hate it when people cite the Japan crash as a "worst case scenario" for stocks. I'm sure your opinion is important to you. The Japanese market lost about 70% of its value in the three years after the '89 peak, but it also GAINED just as much in the three years right before the peak. It was a massive bubble that inflated and then popped, but the long term CAGR of the Nikkei with reinvested dividends is a pretty solid 3.4% after inflation through all of that. It's not as good as the US market, but it's nothing to sneeze at in the world of international markets. And it's certainly not the doomsday scenario that some people like to claim it is.
If the US market ever reaches a new all time high and then climbs 800% in nine years, you can start to worry. To follow the same path as the Nikkei, the SP500 would have had to hit 3k in 2016 and 6k in 2019 and then 12k in 2022. Instead, we're struggling along at 2600. There is just no way the Japanese historical drop is in any way analogous to our current situation, so I don't see the benefit in scaring people with it.
Iceland lost 90% in 08-09. 90% losses
Wow, I'm seeing a pattern in your bad advice. uh huh
The Iceland market was up roughly six hundred percent in the four years before the crash. The run-up and subsequent crash were caused just as much by lax banking laws and stupid exchange rates as they were by normal bubble market forces, so I'm not sure how you can make any reasonable analogies with the US market. It was a tiny country flooded with foreign money far in excess of it's proportional GDP. Huge portions of the index went to zero when the companies were nationalized (and then saved and revitalized to support the economy, with no wealth generated for investors). What features of Iceland's surge and/or crash do you see echoed in the US market today? Anything at ALL that makes this example relevant in some way?
There is lots to be scared of in the investing world without frightening people with boogeyman stories. Your advice seems good Did you read your own post? (diversify, consider RE, etc) Did you know that the diversification mantra was immaculately conceived? It totally was. Basically some happy naive economists decided it seemed like fun. They definitely did not have a history of 90% losses in mind when they thought of it. but you don't need to exaggerate the history. It's like telling your teenager he'll get hairy palms if he beats his meat; you quickly lose credibility with such gross distortions. Why not just lay out the real facts instead? Those are scary enough.
Other False and Misleading Real Facts:
Pretty much the stock market of every nation had a 90% loss if it is more than a few decades old.
The Dutch (Danish? forget) market lost 70% in two weeks
The US market lost 20% in one day. 20% of all your US stock investments. Poof. Between 9:30 and 4:00 ET.
The US Tech Industry lost 90% beginning in 2000, and it was big% of the total market
Amazon lost 50% of its value. Then its remaining investors lost half their remaining investment. Then they lost another half of that. Then 50% of that disappeared.
The Dollar lost 90%, and it never recovered. Ever.
Every currency in the world lost 90%, and never recovered. Ever.
Those are the tip of the iceberg.
Maybe my head is wired weird or I am an inadvertent Stoic, because when I see that list I feel comforted. Hussman says 60% losses ahead? That's not even half as bad as the Great Depression! And those people all came out OK. I see a big long list of things that happened, and I think that not only did people in the past come out OK, but what we're going through now and whatever the financial blabberers predict is way better than what the past was like. I read all of those things and feel a huge sense of relief.
On the other hand, I feel strongly that ignoring history won't make the future easier. If you think that you can't lose money over the short term or even after many years, you will eventually be disappointed. And in that moment of disappointment you might do something, like sell, that makes your loss permanent, instead of the transient losses and long term gains that you so nicely painted above. Or perhaps you will not sell, but live a life of misery and angst for many years because you didn't know. It's better to know in advance what has already happened, so you won't be surprised by very ordinary events.
And the other lesson is diversification. As you pointed out, most of the above happened to very specific subsets of the investable world. So diversify as widely as possible, especially if you are counting on investments for living expenses. The lesson of historic flood records isn't to ignore them because they are scary, it's to use the information you have and build your house above the flood plain.