My worst investment — apart from my recent foray into bank bonds — was the one I never made. It was March 2003, the FTSE 100 had plunged to a low of 3,287 and the mood was of unremitting gloom.

Andrew Smithers of Smithers & Co, who had predicted the crash, thought the Footsie would slump to 2,800; James Montier of Dresdner Kleinwort Wasserstein, a bear then and now, thought it would drop even lower, to 1,800.

On the other hand, equities were at their cheapest relative to bonds for 40 years — the yield on the FTSE All Share had jumped to 4.04% while on gilts it had dipped to 4.02%, the first time there had been a crossover since 1959.

A few voices said it was a compelling buy signal, but I hesitated. The following week, the Footsie jumped 7% and I regretted it; the week after, the index fell 4% and I congratulated myself — I was gambling with a house deposit, after all. By the end of the year, the Footsie had risen 36%. Had I bought at the bottom, I would have made 96% by the end of 2007.

The same buy signal flashed at the end of last month, when legendary stockpicker Anthony Bolton declared we were entering the bear market’s final phase.

Stocks have been heading down ever since, closing at 4,063 on Friday. So why hasn’t the signal worked this time?

Well, the economic outlook appears worse. Then, the crash in technology companies didn’t hit the economy, despite their dominant share of the Footsie — the US suffered only a mild recession and Britain escaped it.

This time, the banks’ crash is likely to go deeper as their inability to lend hits companies and individuals alike. Some analysts even talk about us going the same way as Japan, stuck in a bear market for nearly 20 years — its Nikkei 225 index has never regained the peak of about 39,900 in 1989, standing now at 8,693.82.

For anyone with a pension or investments, or indeed bank bonds, it’s a frightening prospect.

I’m drawing comfort from the fact that we could already be eight years into our “lost decade”. The FTSE 100 peaked at 6,930 on December 31, 1999, and has not made it back, despite trying hard last year when it hit 6,722 in October. (Incidentally, the investment bank Morgan Stanley warned just a few weeks earlier it was time to dump equities for cash, as we reported at the time.)

If you’d invested in the All Share at the start of the decade — as many unfortunate people did, lured in by aggressive advertising — you would have lost 20%, and that’s including dividends.

There could be 10 years of poor returns to come, if we follow the Japanese, but most analysts think our authorities have acted quickly enough to prevent that.

Even Andrew Smithers said on Friday: “I think stocks are, at last, fairly valued . . . and might be a bit cheap.” Bold words from such a long-term pessimist.

History suggests a decade of negative returns is the exception rather than the rule. It has happened once since 1900, according to the Barclays Capital Equity Gilt study — equities fell 7.9% between 1910 and 1920.

Long-term investors should take comfort and sit tight. For those due to retire in the next five years, it’s a different matter. Some will have enjoyed the super-normal returns of the 1980s and 1990s; others may have jumped on the bandwagon too late and face a big shortfall in their retirement income.

There is growing anger that the public sector can retire in (relative) luxury when private- sector pensions have lost billions. This crisis could be the impetus for the government to act.

Kathryn Cooper is editor of the Money section

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