Why don't "financial experts" look at historical perspective?

Bad markets bring out "financial experts" in droves. Bad news is great for the media biz. All that confusion and panic. What a wonderful opportunity to "help" beleaguered investors understand what is going on.

What's the quality of the advice so freely given?

Historical data is not predictive, but at least it's factual. The musings of talking heads is often inaccurate, not predictive and rendered in a historical vacuum.

Here's some data that may help you sort out the mess we're in.

2000-2002 was the worst three-year period in the last thirty-eight years for both the large U.S. equity markets and the non-U.S. equity markets.

The aggregate loss for large U.S. equity stocks was 43.07%. For non-U.S. stocks it was even worse: 51.55%.

But look what happened from 2003-2007. U.S equity stocks increased in value by an aggregate of 65.57%. Non-U.S. stocks gained 109.92%.

Investors who panicked lost big. Those who stayed the course profited handsomely.

When you look at smaller sectors, the pattern is the same: Big losses were followed by big gains.

In 1973-1974, small U.S. equity stocks lost 50.8%. But in the following two years, that sector gained 110.2%.

In 1997-1998, commodities lost 49.8%. In the following two years, it gained 90.2%

In every major asset class, there has never been a sustained period of big losses where the markets have not recovered and rewarded patient investors with significant gains.

I can't predict the future. But it makes sense to understand the past.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books 2008).