It may be too late for investors to bail

With the stock market stuck in a maelstrom, investors are talking more about the “lost decade.”

This is a reference to the realization that stock values overall have gone nowhere since the late 1990s. Not only are prices lower on balance, but values are down even if you factor in reinvested dividends along the way.

That’s a rare occurrence and something that hasn’t been topical since the stagflation days of the late 1960s and 1970s, when stocks also foundered for an extended period.

If anything, the current 10-year stretch is looking worse than anything that happened back then. It could wind up as the worst 10-year period ever.

Up to now, the weakest 10-year stretch for the Standard & Poor’s 500 index was from 1929 through 1938, when stocks declined about 0.9 percent a year on average, including reinvested dividends, according to figures dating to 1926 compiled by researcher Ibbotson Associates. The only other 10-year stretch of negative total returns was from 1930 to ’39.

Even the late 1960s and early 1970s never got this bad. Including dividends, the worst 10-year stretch back then was 1965 through 1974, when stocks posted a positive yearly return of 1.2 percent.

If the S&P 500 finishes this year down roughly 40 percent, about where it stood in mid-November, that would translate into an average annual compounded loss of 1 percent from 1999 through 2008, slightly eclipsing that 0.9 percent yearly decline from 1929 through 1938.

It’s enough to prompt people to think about throwing in the towel. Should you do it? It largely depends on your stomach for risk and near-term cash needs.

But in general, stocks seem much closer to a bottom than a top, especially for those willing and able to hold for many years.

“I’m telling younger investors that they have an opportunity that comes around only once every 50 years or so,” said Jeff Young, an investment adviser at First Financial Equity Corp. in Scottsdale, Ariz.

Jason Lattin, an investment principal at Lowry Hill in Scottsdale, Ariz., said some investors might need to sell if they can’t handle the roller-coaster or face a known, big-ticket expense in the next year and need to cash some chips to pay for it. Otherwise, he suggests that investors sit tight. “If you haven’t sold already, it’s probably too late,” he said.