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Investing for the long term
Posted on 8/5/11 at 10:51 am
Posted on 8/5/11 at 10:51 am
LINK
Look at the link and view the DOW on the "All" setting. Just eyeballing it, it appears that the if you averaged everything that has happened since 1999, the results would be no better than 1999.
If you are a diversified buy and hold investor whose whose stock portfolio follows the DJIA, your stocks would have seen almost no gain over the past 11 years. Plenty of AAA bonds have taken a beatdown as well with the mortgage crisis, not to mention GM and Lehman.
Was this just a bad decade or have the rules changed? Can you still expect gains as a hands off in it for the long term investor?
Look at the link and view the DOW on the "All" setting. Just eyeballing it, it appears that the if you averaged everything that has happened since 1999, the results would be no better than 1999.
If you are a diversified buy and hold investor whose whose stock portfolio follows the DJIA, your stocks would have seen almost no gain over the past 11 years. Plenty of AAA bonds have taken a beatdown as well with the mortgage crisis, not to mention GM and Lehman.
Was this just a bad decade or have the rules changed? Can you still expect gains as a hands off in it for the long term investor?
3
Posted on 8/5/11 at 11:46 am to eelsuee
nobody knows.
Posted on 8/5/11 at 12:24 pm to foshizzle
quote:
Your page doesn't include dividends.
Yea, I thought about that, but either way the last decade has been terrible for anyone who was expecting to retire sometime in the 2010's.
Posted on 8/5/11 at 12:54 pm to eelsuee
If you had a diversified portfolio including total US equity market, international, emerging markets, small/mid value, intermediate T's and TIPS, total bond market, IG corps---you would have done very well reinvesting dividends and adding new money. Very rarely do investors invest all the money they will ever invest in the market on one certain date.
The Ben Graham 25/75 guideline would have served you well. Ie, be at the low end when the market is high or irrationally priced and add more risk when the market is at historically favorable levels. I mean, shite, people can do this in their 401ks at will, it is not difficult. You have to use some foresight, have a plan and stick to it.
The Ben Graham 25/75 guideline would have served you well. Ie, be at the low end when the market is high or irrationally priced and add more risk when the market is at historically favorable levels. I mean, shite, people can do this in their 401ks at will, it is not difficult. You have to use some foresight, have a plan and stick to it.
Posted on 8/5/11 at 12:57 pm to eelsuee
Another question to ask is how many people are making the same or less than the amount they made from employment in 1999? Nominal and inflation adjusted.
This post was edited on 8/5/11 at 12:58 pm
Posted on 8/5/11 at 1:21 pm to tirebiter
quote:That isn't relevant since the market from 1999 to now has averaged about the same as in 1999. If your money was invested with a uniform distribution over that time, it would average out about the same as if you stuck it all in the market in 1999.
Very rarely do investors invest all the money they will ever invest in the market on one certain date.
Now, I am neglecting dividends, which I would assume over the entire market is between 1 and 2 percent, but that is a straight guess.
I would also guess bonds have performed better over the last decade, however the "historical knowledge" of getting 8% to 10% return over the long term will require some major gains in the next 10+ years to stay true.
Posted on 8/5/11 at 1:29 pm to Blakely Bimbo
quote:
Another question to ask is how many people are making the same or less than the amount they made from employment in 1999? Nominal and inflation adjusted.
Well take into acount the products purchased in 1999 vs 2011. Manufactored products are much cheaper today than decades past.
Posted on 8/5/11 at 2:07 pm to eelsuee
quote:
If your money was invested with a uniform distribution over that time, it would average out about the same as if you stuck it all in the market in 1999.
Totally disagree, equity returns are anything but normally distributed. You also are discounting the bull market run up of the late 80's to 2001 when the tech sector blew its wad and 9/11 occurred, PE's were over 45 and companies were being sold for vast sums on a pre-revenue basis (not pre-profit, pre-revenue). Anyone starting to invest in 2002, or avoided the tech sector in 2000 and had a value oriented investment style as part of a diversified plan, would have done magnitudes better.
Posted on 8/5/11 at 3:27 pm to tirebiter
quote:
If you had a diversified portfolio including total US equity market, international, emerging markets, small/mid value, intermediate T's and TIPS, total bond market, IG corps---you would have done very well reinvesting dividends and adding new money.
This is correct. I happen to know that because that is in fact what I did and did reasonably well over the period. The sectors I chose aren't quite the same but it's the same basic idea.
Posted on 8/5/11 at 3:32 pm to foshizzle
The next thing someone will want to start arguing is the concept of time diversification which has been proven to be patently false. 
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