I recently wrote a piece here about the best stock market returns on a hypothetical balanced portfolio of investments. I thought it might be interesting to look at the worst investment return time periods.

Worst Historical Returns

1 Yr. -43.13% Jun. 1932

5 Yr. -6.99% May 1932

10 Yr. 0.67% Aug. 1939

15 Yr. 2.5% Aug. 1944

20 Yr. 3.3% Aug. 1949

25 Yr. 5.05% Aug. 1954

For those people who claim the current war in Iraq is the reason for the improved stock market under president Bush 43, and for those who claim that Roosevelt and/or World War 2 ended the great recession, I point out that the worst investment years in stock market history included the administrations of Roosevelt and Truman and WW2.

It is thus not at all a given that the public works projects of Roosevelt or the industrial and military activity during WW2 were beneficial to the economy at all if one looks at investment returns. The average rate of return since 1926 has been 8.36% for our hypothetical balanced portfolio. We've beat that handily in the past 6 years. It may be a unique situation that we experience now wherein the stock market has produced relatively high returns and where we are engaged in fairly large-scale combat. This is, historically, a difficult feat to pull off. Perhaps Bush 43 has not been as wrong and stupid as he's given credit for.

One happy note for investors: The hypothetical balanced portfolio has not had a significant 10-yr losing period since 1926. This speaks to the benefits of asset allocation and diversification. The balance in the portfolio was approximately 45% US equities, 8% foreign stocks, 30% bonds, 10% short-term investments, and the rest miscellaneous other (gold stocks or other commodities, for example).

There were significant one and five year periods of loss, however. Thus, if already very near or in retirement, one might wish to decrease the volatile components of the portfolio and increase bonds and short-term investments.

I would call this a conservative approach to investment. You won't get rich in a year, but...