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Bear Markets Do Wonders for Retirement

The study makes its point in dramatic fashion by pointing out that a 30-year investment that began in 1929 ended with a total gain of 960%. The investor who started in 1970 fared even better: 1,753%.

By comparing the results with investors who began saving during bull markets in the 1980s and 1990s, the four investors did twice as well with their money.

"As counterintuitive as it may feel, it is actually a silver lining that the prices have gone down," says Stuart Ritter, assistant vice president of T. Rowe Price Investment Services. "For young investors still in the accumulation phase, it is better to have the bear market first, because then you buy a whole lot of shares at a lower price than when the bull market hits."

Ritter, who also teaches a class on personal finance at Johns Hopkins University in Baltimore, says the younger generation is starting to embrace that message despite rampant pessimism.

"They see older people panicking, and they understand why," he says. "But they are saying, 'Gee, 2008 felt bad and people worried about it, but I'm 22 years old and it's a long time before I am going to use this money.' It is a little bit easier for them to put 2008 in perspective, which I find interesting because, for their investing lifetime, 2008 represents all of it. But they are still pretty good at putting it in perspective and saying, 'It is just one year. I have a whole lot more ahead of me.' "

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