VictoriaWikipedia about Free fall wrote:Free fall is any motion of a body where gravity is the only force acting upon it, at least initially. These conditions produce an inertial trajectory so long as gravity remains the only force. Since this definition does not specify velocity, it also applies to objects initially moving upward.
U.S. stocks in free fall
Free fall can also be upward.
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Since Sept 30 1990 to Sept 21 2011 close, an investment in Vanguard S&P 500 Index returned approx. 8.7% per annum.Lbill wrote:Since the late 1990's the S&P 500 has moved essentially sideways
Since Sept 30 1995 to Sept 21 2011 close, an investment in Vanguard S&P 500 Index returned approx. 6.3% per annum.
Worst case for S&P 500 is since the peak of Tech bubble in 1999.
Since Sept 30 1999 to Sept 21 2011 close, an investment in Vanguard S&P 500 Index returned approx. 1.0% per annum.
During the worst period for S&P 500 Index, an investment in Vanguard Total Bond Index returned approx. 6.1% per annum.
A 50/50 mix of VFINX / VBMFX returned appox. 3.9% per annum during one of the worst periods in the history of U.S stock markets.
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- jeffyscott
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Over the last 14 years US stocks (VTSMX) would have underperformed cash (using short term treasury to represent cash):Lbill wrote:Since the late 1990's the S&P 500 has moved essentially sideways, but there's been a lot of volatility.
http://quote.morningstar.com/fund/chart ... %2C0%22%7D
I'd guess that stocks probably barely kept up with inflation...let me check...to match inflation $10,000 in 1997 would need to be $14,115 today http://data.bls.gov/cgi-bin/cpicalc.pl? ... year2=2011
VTSMX would be $16,363, so that's 14 years with cumulative real return of about 16%, that's a bit over 1% real per year.
While T-Bills returned 2.8% per year. A funny thing happened on the way to the equity risk premium....Since Sept 30 1999 to Sept 21 2011 close, an investment in Vanguard S&P 500 Index returned approx. 1.0% per annum.
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
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"You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs
Which shows that a pure buy-and-hold strategy would have failed miserably. But a stock/bond mix with regular rebalancing would have - and for many of us, has - done much better.Since Sept 30 1999 to Sept 21 2011 close, an investment in Vanguard S&P 500 Index returned approx. 1.0% per annum.
Anyway, this thread is about stocks being in "freefall", whatever that means. I contend that this is not true - they are just being volatile, as they have been for some time, and this is a good thing, not a bad thing.
plnelson wrote:
Often such claims are made, but without any supporting data. As it turns out, there was practically no difference in total return between an annually rebalanced and non-rebalanced portfolio of 50% stocks + 50% bonds over the 2000-2010 period. The former returned approx 3.8% nominal annual, while the latter returned 3.6%. You would have ended up with $250 more on a $10K starting investment. Meanwhile, the volatility was actually lower with the unrebalanced portfolio (7.4% vs 9.8% annualized SD). So, I guess volatility is actually the gift that stopped giving....I think all this volatility is great - I have a conventional stock-and-bond-and-rebalance portfolio and I have a trading portfolio. My stock-and-bond-and-rebalance portfolio has ploddingly gained over the years through many rebalances despite the sideways S&P. And the trading portfolio has done fantastically well. If the markets had been placid over the last 12 years, but with the same closing prices today, neither portfolio would have done as well as they have. Volatility is a gift to us all.
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
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"You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs
- rcshouldis
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If you landed here from moon in 1999 and put down all your money on S&P 500 Index and did not add / take a dime to it, yeah, then that's what you got.Lbill wrote:While T-Bills returned 2.8% per year. A funny thing happened on the way to the equity risk premium....Since Sept 30 1999 to Sept 21 2011 close, an investment in Vanguard S&P 500 Index returned approx. 1.0% per annum.
I am pretty sure this is how most people invest their money.
The key word, above, is "annually" rebalanced. Many (most?) of us don't rebalance annually, we rebalance when our allocations fall outside our target percentages. I've done 2 rebalances in the last 12 months - the first one, about 8 months ago shifted some money from stocks to st bonds, the second one, about a month ago went in the other direction.Lbill wrote: As it turns out, there was practically no difference in total return between an annually rebalanced and non-rebalanced portfolio of 50% stocks + 50% bonds over the 2000-2010 period. The former returned approx 3.8% nominal annual, while the latter returned 3.6%. You would have ended up with $250 more on a $10K starting investment. Meanwhile, the volatility was actually lower with the unrebalanced portfolio (7.4% vs 9.8% annualized SD). So, I guess volatility is actually the gift that stopped giving....
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I'm 58 and I'm happy with it. The key is diversification across many dimensions. Not just different asset classes and levels of risk, but also across strategies. I have portfolios that follow Bogleheadish rules, ones with bond-ladders, ones with long-term value investing, and a trading portfolio.rcshouldis wrote:For those who think that the stock market is a good way to save for retirement :
Think again :roll:
And CPI inflation averaged 2.8% so if you weren't in gold (or something that went up a reasonable amount), you're not gaining ground on that retirement. Oh, and you did pay taxes on those T-Bills too...Lbill wrote:While T-Bills returned 2.8% per year. A funny thing happened on the way to the equity risk premium....Since Sept 30 1999 to Sept 21 2011 close, an investment in Vanguard S&P 500 Index returned approx. 1.0% per annum.
Yes, some people use "bands" to rebalance. Do you have any data that shows whether this worked any better than annually rebalancing? I'm skeptical that any method of rebalancing actually improves risk-adjusted returns on a predictable basis. This agrees with the view of Larry Swedroe. The reason that rebalancing hasn't worked very well over the last 10-12 year period is that bonds have outperformed stocks and rebalancers just kept on selling those good old bonds to buy stocks to get whacked again and again. Ask a Japanese investor how that rebalancing back into stocks has been working for him the last 20 years or so.The key word, above, is "annually" rebalanced. Many (most?) of us don't rebalance annually, we rebalance when our allocations fall outside our target percentages. I've done 2 rebalances in the last 12 months - the first one, about 8 months ago shifted some money from stocks to st bonds, the second one, about a month ago went in the other direction.
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
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"You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs
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- Noobvestor
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I'm not sure why holding the S&P 500 is being called a 'pure' strategy - it is a concentrated bet on 500 US companies, not a global equity portfolio (let alone a global investment portfolio)plnelson wrote:Which shows that a pure buy-and-hold strategy would have failed miserably. But a stock/bond mix with regular rebalancing would have - and for many of us, has - done much better.Since Sept 30 1999 to Sept 21 2011 close, an investment in Vanguard S&P 500 Index returned approx. 1.0% per annum.
Anyway, this thread is about stocks being in "freefall", whatever that means. I contend that this is not true - they are just being volatile, as they have been for some time, and this is a good thing, not a bad thing.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
Perhaps he rebalanced as part of risk management and not to have better returns, as you seem to assume.Lbill wrote:Yes, some people use "bands" to rebalance. Do you have any data that shows whether this worked any better than annually rebalancing? I'm skeptical that any method of rebalancing actually improves risk-adjusted returns on a predictable basis. This agrees with the view of Larry Swedroe. The reason that rebalancing hasn't worked very well over the last 10-12 year period is that bonds have outperformed stocks and rebalancers just kept on selling those good old bonds to buy stocks to get whacked again and again. Ask a Japanese investor how that rebalancing back into stocks has been working for him the last 20 years or so.The key word, above, is "annually" rebalanced. Many (most?) of us don't rebalance annually, we rebalance when our allocations fall outside our target percentages. I've done 2 rebalances in the last 12 months - the first one, about 8 months ago shifted some money from stocks to st bonds, the second one, about a month ago went in the other direction.
You assume that he rebalanced to
- jeffyscott
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The bond portion of the my stock-bond-rebalance portfolio is mostly a short term bond fund. They make smaller price moves than LT bonds so rebalancing out of stocks when they're high has less of an effect of moving into another "high" asset class; it's more like moving between cash and stocks. But lately I've been mixing an intermediate bond fun in, so this may change my results.Lbill wrote: Yes, some people use "bands" to rebalance. Do you have any data that shows whether this worked any better than annually rebalancing? I'm skeptical that any method of rebalancing actually improves risk-adjusted returns on a predictable basis. This agrees with the view of Larry Swedroe. The reason that rebalancing hasn't worked very well over the last 10-12 year period is that bonds have outperformed stocks and rebalancers just kept on selling those good old bonds to buy stocks to get whacked again and again. Ask a Japanese investor how that rebalancing back into stocks has been working for him the last 20 years or so.
I don't have any data about whether "band" rebalancing works better but to me it intuitively seems like it should which is why I do it. I'd like to see some data on this, though.
Thinking that equities have no place in a long term investment strategy is as silly as thinking bonds have no place in a long term investment strategy. If the ebbs and flows of the market drastically change your long term strategy you probably shouldn't have discretion over your investments.Johm221122 wrote:Stop drinking cool aid :lol:rcshouldis wrote:For those who think that the stock market is a good way to save for retirement :
Think again :roll:
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Growth of $10,000, over the past 14 years:Noobvestor wrote:I'm not sure why holding the S&P 500 is being called a 'pure' strategy - it is a concentrated bet on 500 US companies, not a global equity portfolio (let alone a global investment portfolio)
Vanguard Total Intl Stock Index Inv:16,396.44
MSCI EAFE NR USD:15,565.38
Vanguard Total Stock Mkt Idx Inv:16,363.41
Vanguard Short-Term Treasury Inv:18,835.03
Bonds did not help much (see VBINX returns above)
What would have helped was paying even the tiniest bit of attention to valuations:
14 year growth of $10K in Vanguard Wellington Inv: 23,524.62
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I think a balanced portfolio is the right answer,what do you think???rcshouldis says stocks are not a good way to save for retirement I think there the corner stone,but not whole houseNERD777 wrote:Thinking that equities have no place in a long term investment strategy is as silly as thinking bonds have no place in a long term investment strategy. If the ebbs and flows of the market drastically change your long term strategy you probably shouldn't have discretion over your investments.Johm221122 wrote:Stop drinking cool aid :lol:rcshouldis wrote:For those who think that the stock market is a good way to save for retirement :
Think again :roll:
- rcshouldis
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When you're all selling pencils on the street corner very shortly, don't say you weren't warned.Johm221122 wrote:I think a balanced portfolio is the right answer,what do you think???rcshouldis says stocks are not a good way to save for retirement I think there the corner stone,but not whole houseNERD777 wrote:Thinking that equities have no place in a long term investment strategy is as silly as thinking bonds have no place in a long term investment strategy. If the ebbs and flows of the market drastically change your long term strategy you probably shouldn't have discretion over your investments.Johm221122 wrote:Stop drinking cool aid :lol:rcshouldis wrote:For those who think that the stock market is a good way to save for retirement :
Think again :roll:
Is this a sign that equity capitulation is near?rcshouldis wrote:When you're all selling pencils on the street corner very shortly, don't say you weren't warned.Johm221122 wrote:I think a balanced portfolio is the right answer,what do you think???rcshouldis says stocks are not a good way to save for retirement I think there the corner stone,but not whole houseNERD777 wrote:Thinking that equities have no place in a long term investment strategy is as silly as thinking bonds have no place in a long term investment strategy. If the ebbs and flows of the market drastically change your long term strategy you probably shouldn't have discretion over your investments.Johm221122 wrote:Stop drinking cool aid :lol:rcshouldis wrote:For those who think that the stock market is a good way to save for retirement :
Think again :roll:
In April, you were 50/50. What changed your mind?rcshouldis wrote:When you're all selling pencils on the street corner very shortly, don't say you weren't warned.Johm221122 wrote:I think a balanced portfolio is the right answer,what do you think???rcshouldis says stocks are not a good way to save for retirement I think there the corner stone,but not whole houseNERD777 wrote:Thinking that equities have no place in a long term investment strategy is as silly as thinking bonds have no place in a long term investment strategy. If the ebbs and flows of the market drastically change your long term strategy you probably shouldn't have discretion over your investments.Johm221122 wrote:Stop drinking cool aid :lol:rcshouldis wrote:For those who think that the stock market is a good way to save for retirement :
Think again :roll:
http://www.bogleheads.org/forum/viewtop ... 59#1022659
I always wanted to be a procrastinator.
My belief in the Tooth Fairy is stronger than my belief in the so-called Equity Risk Premium (actually I believe the ERP is negative). I'm putting my IRA under my pillow and hoping that I'll find a quarter there when I wake up tomorrow.
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
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If he didn't rebalance, he's down to 45/55 as well as -5% on his portfolio. AA will be closer and overall loss larger if he did rebalance on the way down.Sidney wrote:In April, you were 50/50. What changed your mind?
http://www.bogleheads.org/forum/viewtop ... 59#1022659
Maybe, maybe not, but the headlines are similar:allsop wrote:Is this a sign that equity capitulation is near?
Global Meltdown: Investors Are Dumping Nearly Everything (CNBC)
The only green on my screen is treasuries, and even moreso, munis.
Last edited by xerty24 on Thu Sep 22, 2011 12:40 pm, edited 2 times in total.
- Taylor Larimore
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"Death of Equities"
Bogleheads:
The Newsweek cover: "Death of Equities" is dated August 13, 1979 when the S&P 500 Index closed at 107.
Today the S&P is about 1,100 (dividends not included).
Bogleheads ignore media "noise" and stay-the-course.
Edit in red
The Newsweek cover: "Death of Equities" is dated August 13, 1979 when the S&P 500 Index closed at 107.
Today the S&P is about 1,100 (dividends not included).
Bogleheads ignore media "noise" and stay-the-course.
Edit in red
Last edited by Taylor Larimore on Thu Sep 22, 2011 1:21 pm, edited 4 times in total.
"Simplicity is the master key to financial success." -- Jack Bogle
- jeffyscott
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Re: "Death of Equities"
It was also 1100 in 1998, 2001, 2003, 2004, 2008, 2009, and 2010Taylor Larimore wrote:Today the S&P is about 1,100 (dividends not included).
- Mel Lindauer
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Re: "Death of Equities"
Actually, my friend, that was August 13, 1979. (Gotta clean those glasses once in a while!)Taylor Larimore wrote:Bogleheads:
The Newsweek cover: "Death of Equities" is dated August 13, 1995 when the S&P 500 Index was about 550.
Today the S&P is about 1,100 (dividends not included).
Bogleheads ignore media "noise" and stay-the-course.
Best Regards - Mel |
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Semper Fi
- Taylor Larimore
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"550" actually "107"
Hi Mel:
Thank you for the correction. I edited my post.
Thank you for the correction. I edited my post.
"Simplicity is the master key to financial success." -- Jack Bogle
Is that on cost basis or just today's changes? I don't have any stocks that went below their cost basis today - that screen is all green. If I just look at today's results it's all red, but that's what one would expect on a day when the Dow drops 482 points. Meanwhile I just bought GE and CVX - good long term growth prospects, and great dividends which will make it more tolerable to wait for the recovery, which could be awhile.xerty24 wrote:Maybe, maybe not, but the headlines are similar:allsop wrote:Is this a sign that equity capitulation is near?
Global Meltdown: Investors Are Dumping Nearly Everything (CNBC)
The only green on my screen is treasuries, and even moreso, munis.
didn't GE cut their dividend last time we had a recession?plnelson wrote:Is that on cost basis or just today's changes? I don't have any stocks that went below their cost basis today - that screen is all green. If I just look at today's results it's all red, but that's what one would expect on a day when the Dow drops 482 points. Meanwhile I just bought GE and CVX - good long term growth prospects, and great dividends which will make it more tolerable to wait for the recovery, which could be awhile.xerty24 wrote:Maybe, maybe not, but the headlines are similar:allsop wrote:Is this a sign that equity capitulation is near?
Global Meltdown: Investors Are Dumping Nearly Everything (CNBC)
The only green on my screen is treasuries, and even moreso, munis.
I always wanted to be a procrastinator.
Today's change for a bunch of market indexes and ETFs. I don't hold most of this stuff except for a few munis right now anyway. I don't think too much about cost basis, except for tax decisions, since it leads to sunk cost irrationality if you're not careful.plnelson wrote:Is that on cost basis or just today's changes? I don't have any stocks that went below their cost basis today - that screen is all green.
Actually I expect them to cut it back slightly. 3.7% is kind of outrageously high for a company like that - I'd rather it be under 3% and the money used for R&D or expansion. I think they are widely expected to do this so it may already be priced-in.Sidney wrote: didn't GE cut their dividend last time we had a recession?
But their big problem in 2008 was due to GE Capital's excesses which nearly torpedoed the company. Since then they have scaled back GE Capital and limited it to financial operations more in tune with helping GE's businesses. (e.g., if some hospital wants to buy some expensive GE MRI unit GE Capital can make the financing easier.)
Jeffy wrote:
Sometimes the required time period for buy-and-hold to work as advertised begins to suggest that the market can stay down longer than one can stay alive.It [the S&P 500] was also 1100 in 1998, 2001, 2003, 2004, 2008, 2009, and 2010
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
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"You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs
DOW finished down 391. We'll see tomorrow if players want to hold stocks into the weekend with Europe ready to tank - I'm guessing No.
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard |
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"You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs
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- LazyNihilist
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It's not fair to make fun of the media, specifically its constant need to explain why the markets are down...even on days that the Dow actually reverses and ends higher.
But we make fun of them anyways, and Ezra Klein from WaPo adds his take:
http://www.washingtonpost.com/blogs/ezr ... ezra-klein
But we make fun of them anyways, and Ezra Klein from WaPo adds his take:
http://www.washingtonpost.com/blogs/ezr ... ezra-klein
"By singing in harmony from the same page of the same investing hymnal, the Diehards drown out market noise." |
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--Jason Zweig, quoted in The Bogleheads' Guide to Investing