# Did the 1929 stock crash really hurt long-term investors? Why not wait it out? **URL:** \ **Category:** Factual Questions\ **Created:** [September 16, 2011, 2:32am UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465 "2011-09-16T02:32:07Z")\ **Posts on this page:** 17\ **Page:** 2
**Author:** ![Melbourne](https://avatars.discourse-cdn.com/v4/letter/m/b5e925/32.png) [@Melbourne](https://boards.straightdope.com/u/Melbourne)\ **Post date:** [May 3, 2020, 11:56am UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/21 "2020-05-03T11:56:10Z")
> [@Kent\_Clark](#): > > So the folks who invested at the height of the market didn’t get back to start for 25 years. This. My Grandfather was a Bell Hop in an apartment building. Not a margin investor, not rich, just some industrial stock in a good company, that was still growing and doing well 40 years later – by which time it was worth more than he paid for it. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [May 3, 2020, 12:53pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/22 "2020-05-03T12:53:43Z")
> [@F.U.Shakespeare](#): > > Interesting thread. I had long heard the statistic that if you account for inflation, the Dow didn’t get back up to 1929 peak levels until 1954. In #19, the very post before yours, I show that the apparent price restoration in 1954 _ **does not** _ account for inflation. Those stats do NOT account for dividend reinvestment. I’d like to factor in the dividends, but Google didn’t show them to me. ---
**Author:** ![PatrickLondon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/patricklondon/32/4422_2.png) [@PatrickLondon](https://boards.straightdope.com/u/PatrickLondon)\ **Post date:** [May 3, 2020, 12:56pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/23 "2020-05-03T12:56:45Z")
As I recall, nobody went into the details of what sort of fly-by-night scheme her money had been placed with. And since she’d already been working there since somewhere near the turn of the century, she’d have been retiring much earlier than 1955. For the purposes of the plot, “naive saver ruined by trusting a plausible but equally naive posho” is a fairly time-honoured dramatic trope. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [May 3, 2020, 1:26pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/24 "2020-05-03T13:26:34Z")
I think a mistake a lot of people make is thinking that the stock market that existed before the crash was in a normal state and needed to recover to that level. It was actually in a bubble in which stock prices were unrealistically high. Nobody asks if somebody should have held on to their tulips after the 1637 crash and waited until they recovered their value. ---
**Author:** ![Surreal](https://avatars.discourse-cdn.com/v4/letter/s/eada6e/32.png) [@Surreal](https://boards.straightdope.com/u/Surreal)\ **Post date:** [May 3, 2020, 1:59pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/25 "2020-05-03T13:59:04Z")
> [@septimus](#): > > _The 1955 dollar was worth only 39 cents of a 1930 dollar (based on a consumer bundle). **In that sense the stock market was still down over 50% even in 1955.** _ Nonsense. From 1932 to 1955, the US stock market returned **9.7%** per year after adjusting for inflation and dividend reinvestment. > **[S&P 500 Return Calculator, with Dividend Reinvestment](https://dqydj.com/sp-500-return-calculator/)** > > Estimate historical investment performance with the S&P 500 calculator. Show both inflation-adjusted and nominal returns, plus dividends. ---
**Author:** ![F.U.Shakespeare](https://avatars.discourse-cdn.com/v4/letter/f/aca169/32.png) [@F.U.Shakespeare](https://boards.straightdope.com/u/F.U.Shakespeare)\ **Post date:** [May 3, 2020, 2:03pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/26 "2020-05-03T14:03:37Z")
> [@septimus](#): > > In #19, the very post before yours, I show that the apparent price restoration in 1954 _ **does not** _ account for inflation. Yes, I was trying to reconcile the claim I’ve heard for years with the data you presented… > [@](#): > > Those stats do NOT account for dividend reinvestment. I’d like to factor in the dividends, but Google didn’t show them to me. …and I’m wondering if dividend reinvestment could be the key to this. ---
**Author:** ![Mk\_VII](https://avatars.discourse-cdn.com/v4/letter/m/5f9b8f/32.png) [@Mk\_VII](https://boards.straightdope.com/u/Mk_VII)\ **Post date:** [May 3, 2020, 2:12pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/27 "2020-05-03T14:12:37Z")
> [@PatrickLondon](#): > > As I recall, nobody went into the details of what sort of fly-by-night scheme her money had been placed with. And since she’d already been working there since somewhere near the turn of the century, she’d have been retiring much earlier than 1955. For the purposes of the plot, “naive saver ruined by trusting a plausible but equally naive posho” is a fairly time-honoured dramatic trope. The plot point was that she had asked her employer, Major James, to invest it for her, and most of it was her legacy left her by her fiance. The family (quite rightly) excoriate Major James for having anything to do with touching servants’ money. ---
**Author:** ![F.U.Shakespeare](https://avatars.discourse-cdn.com/v4/letter/f/aca169/32.png) [@F.U.Shakespeare](https://boards.straightdope.com/u/F.U.Shakespeare)\ **Post date:** [May 3, 2020, 2:28pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/28 "2020-05-03T14:28:29Z")
> [@Surreal](#): > > Nonsense. From 1932 to 1955, the US stock market returned **9.7%** per year after adjusting for inflation and dividend reinvestment. > > [S&P 500 Return Calculator, with Dividend Reinvestment](https://dqydj.com/sp-500-return-calculator/) Your link tracks the S&P 500, and the analysis in this thread has been tracking the Dow. More important difference: the crash occurred in late 1929, so the relevant starting point would be 1929, not 1932, by which time it was already down. When I input 1929 and 1954, I get a more modest 4.2% annualized return with dividends reinvested (-1.5% without). More relevant to the OP’s question, I get a total return of 182% (with dividends reinvested). So it appears to be saying the S&P did indeed recover (and then some) between 1929 and 1954. All the above computations were with inflation accounted for. ---
**Author:** ![Surreal](https://avatars.discourse-cdn.com/v4/letter/s/eada6e/32.png) [@Surreal](https://boards.straightdope.com/u/Surreal)\ **Post date:** [May 3, 2020, 2:54pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/29 "2020-05-03T14:54:31Z")
A better example of a long-term bear market is the 17 year period ending in 1983. From January 1966 to January 1983 the S&P 500 returned -0.01% annualized after adjusting for inflation. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [May 3, 2020, 3:10pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/30 "2020-05-03T15:10:42Z")
> [@Surreal](#): > > Nonsense. From 1932 to 1955, the US stock market returned **9.7%** per year after adjusting for inflation and dividend reinvestment. 😕 How does a statement beginning “From the 1932 low …” refute a statement beginning “From the 1929 high …” ? 😕 ETA: I think a 3.3% average dividend rate is what would be needed to make up for inflation over that 25-year period. ---
**Author:** ![Surreal](https://avatars.discourse-cdn.com/v4/letter/s/eada6e/32.png) [@Surreal](https://boards.straightdope.com/u/Surreal)\ **Post date:** [May 3, 2020, 3:37pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/31 "2020-05-03T15:37:45Z")
> [@septimus](#): > > 😕 > How does a statement beginning “From the 1932 low …” refute a statement beginning “From the 1929 high …” ? 😕 > > ETA: I think a 3.3% average dividend rate is what would be needed to make up for inflation over that 25-year period. Even if you look at returns from October 1929 to January 1955 you’d still have an annualized return of over 5% after adjusting for inflation. So your claim “In that sense the stock market was still down over 50% even in 1955” clearly is not correct. ---
**Author:** ![Acsenray](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/acsenray/32/4519_2.png) [@Acsenray](https://boards.straightdope.com/u/Acsenray)\ **Post date:** [May 3, 2020, 3:59pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/32 "2020-05-03T15:59:06Z")
I have a question. Would casual investors like Rose have bought shares in index-linked diversified funds, or would they have just been buying shares in individual companies? If the latter, my assumption is that many of those companies would have just gone bankrupt and wound up, so there would not be any ongoing investment that could recover in the ensuing years and decades. Is that right? ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [May 3, 2020, 4:05pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/33 "2020-05-03T16:05:12Z")
> [@Surreal](#): > > … October 1929 to January 1955 you’d still have an annualized return of over 5% after adjusting for inflation. So your claim “In that sense the stock market was still down over 50% even in 1955” clearly is not correct. The high was in September '29, not October. Can you link to the inflation and dividend rates your source uses? ---
**Author:** ![Surreal](https://avatars.discourse-cdn.com/v4/letter/s/eada6e/32.png) [@Surreal](https://boards.straightdope.com/u/Surreal)\ **Post date:** [May 3, 2020, 4:20pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/34 "2020-05-03T16:20:21Z")
The calculator I linked to above uses data aggregated from Robert Shiller: [http://www.econ.yale.edu/~shiller/data.htm](http://www.econ.yale.edu/~shiller/data.htm) ---
**Author:** ![puddleglum](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/puddleglum/32/137_2.png) [@puddleglum](https://boards.straightdope.com/u/puddleglum)\ **Post date:** [May 3, 2020, 4:56pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/35 "2020-05-03T16:56:52Z")
> [@Acsenray](#): > > I have a question. Would casual investors like Rose have bought shares in index-linked diversified funds, or would they have just been buying shares in individual companies? If the latter, my assumption is that many of those companies would have just gone bankrupt and wound up, so there would not be any ongoing investment that could recover in the ensuing years and decades. Is that right? Index funds did not exist until 1975. She could have invested in a mutual fund. ---
**Author:** ![Acsenray](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/acsenray/32/4519_2.png) [@Acsenray](https://boards.straightdope.com/u/Acsenray)\ **Post date:** [May 3, 2020, 5:42pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/36 "2020-05-03T17:42:23Z")
> [@puddleglum](#): > > Index funds did not exist until 1975. She could have invested in a mutual fund. Okay, but how likely was it? What percentage of casual investors were buying shares in mutual funds back then? ---
**Author:** ![Jackmannii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jackmannii/32/311_2.png) [@Jackmannii](https://boards.straightdope.com/u/Jackmannii)\ **Post date:** [May 3, 2020, 5:54pm UTC](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465/37 "2020-05-03T17:54:08Z")
To pick an individual stock, take Radio Corporation of America (RCA), the hot tech stock of the late 1920s (and especially 1929). In the few years before the crash it went from $11 a share to $549 (near its peak it split 5:1), then collapsed to $10 a share by 1931. Supposedly it didn’t recover to its 1929 peak until the mid-1960s. That’s a long time to wait. [Previous page](https://boards.straightdope.com/t/did-the-1929-stock-crash-really-hurt-long-term-investors-why-not-wait-it-out/596465.md?page=1)