The 25 Year Stock-Price Recovery Myth

(MoneyWatch)  One of the figures commonly bandied about these days is that during and after the Great Depression, it took stocks 25 years to finally recover their full value from 1929. Investors should know that this would be true only if stocks were represented by the Dow Jones Industrial Average. Other indexes paint a different picture.

The Dow didn't return to its September 1929 peak until November 1954. Yet other indexes reached their previous peaks much faster. The following chart shows when various investments made in September 1929 would have recovered their initial value:

• S&P 500 Index -- January 1945
• Total Stock Market -- December 1944
• Large-Cap Value Stocks -- February 1945
• Small-Cap Stocks -- September 1936
• Micro-Cap Stocks -- November 1935
• Small-Cap Value Stocks -- November 1936

In general, large-cap stocks took about 15 years to recover; small-cap stocks took 6-7 years. These aren't the most reassuring figures, but keep in mind that our current economic situation isn't as bleak as during the Great Depression. For another, our policymakers have the benefit of learning from the policy mistakes of the Great Depression.

While we cannot know what the future holds for investors, it is important to realize that not all the bad news being thrown about by the media is the full truth.