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The Naughty Double Ohs

It’s tough to look back, almost painful for many. I’d be curious to see detailed data of how people’s wealth was impacted. Of course, with two crashes, there were two chances to bail at a relative bottom, and call it quits. Looking just at the S&P spider index, ticker SPY, we ended the decade at $111.44. This from a 1999 end of $146.88, down just over 24%. Ouch. But when you adjust the 1999 price for 10 years worth of dividends, you get $124.28 down just over 15%, still not great. The Times published yet another beautiful graphic I’d like to share.

lostdecade

It shows that with a mix of stocks and bonds, one would have not only not lost money, but would have come out a bit ahead of inflation. For this comment, I’m referencing the line that ends just over the $100K. Had the investor added funds, dollar cost averaging, the return would have been better still. $250,000 on a total investment of $220,000 even after adjusting for inflation. It was this method that let me leave the decade better than I went in. How did the zeros treat you?

Joe

  • RJ Weiss January 26, 2010, 4:36 pm

    Most people forget that true “indexing” is having allocations in both stocks and bonds. I find it funny every I explain to someone that I’m an indexer and they talk about the lost decade.

    As for the 00’s, I’m only 25 years old, so I actually got a lot of benefit out of the low prices. The way I see it, I started off my investing buying stocks on “sale.”

  • Augustine January 27, 2010, 3:44 pm

    Are these figures adjusted for inflation?

  • JOE January 27, 2010, 5:49 pm

    Yes, or at least chart says it is.

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