Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Chart Of The Day: Current Post-Financial Crisis Retracement Level
Wow! That means, through today, we've all earned a whopping 2.88% compound annualized growth before taxes by investing in US equities for the full 13.5 years starting off this millennium...and we only had to endure two 50% drawdowns.
Reply to @Investor: I used daily SPY "Adjusted Close" from 1/1/2000 through today. It does include adjustments for dividends and splits. Just double-checked against my monthly database of total returns S&P500 TR. Sorry, sad but true. Less than 50% total return, including reinvested dividends, over 13.5 years.
Here, another look...$10K invested for the millennium babies is under $15K today. Before taxes! This recent rally, the one Ted posted about, better keep running strong if these kids are gonna have an adequate college fund.
Reply to @Charles: Re "sad but true" - Does this mean Bogle's been wrong all these years?
OK - jesting a little here. He's mentioned before that he sees the S&P as the wrong index. I think I'm correct in saying he likes the Wilshire 5000 better as representing a broader swath of the market. (Better check that:-). In fairness to the old boy, his emphasis on bonds has been a good bet over these years. Maybe it all evens out somehow. FWIW
Reply to @Charles: I was there then (investing) in the 90s, but never took the bait. Remember alot of $$ pouring into the 500 during that period. To many this had become gospel and am sure many never expected the run to end. Truth is, everything runs in cycles. And, thanks (to Ted) for the original post.
Reply to @Charles: well that is better than price charts. But still a lot of people lost more in active managers during this time and might be still down. A person with a diversified portfolio has done much better especially. Balanced funds also did very well.
So, diversify and rebalance does help get through these boom bust periods in much better shape.
Reply to @Investor: Good point. The OP assumes one dropped a substantial lump-sum in the index and slept for 13.5 years. Leaves out rebalancing and dollar cost averaging which most younger plan participants use.
Won't dispute that these were not very good years for the S&P. However, IMHO the data neither proves nor refutes the arguments on either side of the passive-active debate. 13.5 years is not a very long time in our lifetime investment horizons - a blip on the radar screen for someone who starts investing at 21 and expects to live another 65 years thereafter. Where, I'll submit, it DOES have relevance is in that most of us are not very well programmed emotionally to deal with this type of erratic performance. That's where actively managed funds which diversify more broadly and include bonds and alternative investments have the edge - in dealing with our own tendencies towards fickleness and impatience.
Comments
Here, another look...$10K invested for the millennium babies is under $15K today. Before taxes! This recent rally, the one Ted posted about, better keep running strong if these kids are gonna have an adequate college fund.
OK - jesting a little here. He's mentioned before that he sees the S&P as the wrong index. I think I'm correct in saying he likes the Wilshire 5000 better as representing a broader swath of the market. (Better check that:-). In fairness to the old boy, his emphasis on bonds has been a good bet over these years. Maybe it all evens out somehow. FWIW
So, diversify and rebalance does help get through these boom bust periods in much better shape.
Won't dispute that these were not very good years for the S&P. However, IMHO the data neither proves nor refutes the arguments on either side of the passive-active debate. 13.5 years is not a very long time in our lifetime investment horizons - a blip on the radar screen for someone who starts investing at 21 and expects to live another 65 years thereafter. Where, I'll submit, it DOES have relevance is in that most of us are not very well programmed emotionally to deal with this type of erratic performance. That's where actively managed funds which diversify more broadly and include bonds and alternative investments have the edge - in dealing with our own tendencies towards fickleness and impatience.