The Wilshire 5000 total market historic ups and downs

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Dog_Papa
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The Wilshire 5000 total market historic ups and downs

Post by Dog_Papa » Sun Aug 18, 2013 12:00 pm

If you take a look at this chart of Wiki:http://en.wikipedia.org/wiki/Wilshire_5000. I believe we could see some very big dips again. Like in 2002 and 2009.
It would appear, that the total stock market has had trouble holding on to big gains made in the past. There are clearly two spikes, followed by exponential declines.

I'm just wondering what will happen when interest rates come back to reality. By that I mean, a rate of interest that would attract investors willing to buy bonds
that have risk in them. Whether you look at interest rates as the risk free rate, plus a premium risk, along with other factors. Like a figure for the length of the
bonds time period and reinvestment risk. Or, inflation plus a real rate of return and a risk premium.

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Re: The Wilshire 5000 total market historic ups and downs

Post by Call_Me_Op » Sun Aug 18, 2013 12:09 pm

Dog_Papa wrote:I'm just wondering what will happen when interest rates come back to reality. By that I mean, a rate of interest that would attract investors willing to buy bonds


Apparently, we have many investors willing to buy bonds at current rates. Otherwise, current rates would not be where they are. In fact, the current rates are where the market (i.e., all of the people who buy and sell bonds) believes they should be, taking into account all known factors.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

MnD
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Re: The Wilshire 5000 total market historic ups and downs

Post by MnD » Sun Aug 18, 2013 12:16 pm

i think you have a bad case of recency bias.
Try this chart instead, take two aspirin and call me in the morning. :happy

Image

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momar
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Re: The Wilshire 5000 total market historic ups and downs

Post by momar » Sun Aug 18, 2013 12:17 pm

Rates for bonds are so low because so many investors are buying bonds. If rates were to somehow rise independently of demand, and thus attract more investors, the increased investors would drive rates right back down.

I also suggest you only look at growth charts in semilog form.
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Rick Ferri
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Re: The Wilshire 5000 total market historic ups and downs

Post by Rick Ferri » Sun Aug 18, 2013 12:33 pm

Why are you worrying about "big market dips" and "interest rates coming back to reality"? These fears are counterproductive to long-term investment success. If you have an investment philosophy and a sensible strategy based on that philosophy, then you won't experience the fears and frustrations that those lacking a fundamental understanding of investing suffer under.

Rick Ferri
The views expressed by Rick Ferri are strictly his own as a private investor and author and do not reflect the views of any entity or other persons.

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Taylor Larimore
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Charts?

Post by Taylor Larimore » Sun Aug 18, 2013 12:59 pm

If you take a look at this chart of Wiki:http://en.wikipedia.org/wiki/Wilshire_5000. I believe we could see some very big dips again. Like in 2002 and 2009.


Bogleheads:

Linear, price-only, stock charts can be very misleading. This is because the vertical distance between prices in a linear scale are not equal when the percent change is the same. Also, the chart above does not include dividends and is not inflation-adjusted to reflect real return.

This is a U.S. stock market logarithmic chart (page 4) showing total return, inflation-adjusted and with a scale that is equal for equal percent changes.

Total Real Return Index

Conclusion: Long-term shareholders of the total U.S. stock market have done exceedingly well.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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nedsaid
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Re: The Wilshire 5000 total market historic ups and downs

Post by nedsaid » Sun Aug 18, 2013 2:31 pm

If you insist on investing by news headlines and charts, you will be in constant buyer's remorse.

I can just tell you that no matter what investment purchase or decision you make, the next day there will be an article somewhere you will come across telling you what you just did was completely wrong. Or you will see an article from a technical analyst that the charts say that the apocalypse is nigh. A crash is coming. (Of course, the same author was bullish one week earlier).

Diversify your portfolio internationally and across asset classes. Invest in good stuff and keep it. Rebalance your portfolio when needed. Keep yourself informed but tune out the noise.

A recent example. The talking heads said "stay out of Europe." OMG. The Euro is collapsing. The PIIGS are going to get kicked out of the European Union. The end of Western Civlization is at hand. Run for the hills!!! And what happened after that? The European stock markets went straight up!!

The problem is that newspapers need to fill up space and TV networks need to fill up air time. A lot of what you hear is relentlessly negative and alarmist and sometimes just wrong.

All CNBC has to do is run John Bogle for a 1/2 hour each day and a test pattern for the other 23 1/2 hours. The quality of thier programming would increase!!
A fool and his money are good for business.

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Dog_Papa
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Re: The Wilshire 5000 total market historic ups and downs

Post by Dog_Papa » Sun Aug 18, 2013 2:41 pm

So, I'm wrong the Fed has not stepped in to buy bonds in the US market twice now. Known as quantitative easing. People would invest their saving in say
mortgage bonds, at today's rates, without a federal backing? At current rates right now, I would not. My contention is that rates are artificially low.
I hear ads for mortgages as low as 2%. Would a rational person would accept credit risk and all that for 2%?

I agree bonds have done well, if you bought them a while ago. If you buy them now, will an investor do well?

I don't think so. Apparently many disagree, or feel they will do well. How much lower can rates go?

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nedsaid
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Re: The Wilshire 5000 total market historic ups and downs

Post by nedsaid » Sun Aug 18, 2013 2:52 pm

Dog_Papa good job on thinking about valuations. They are a very important part of the investment process.

I agree with you that bonds do not represent good value here and I also agree that interest rates are artificially low.
So what am I doing with my own money?

I am at about 69% stocks and 31% fixed income at age 54. Recently as bonds dropped and stocks went up, I did some mild
rebalancing and sold a bit of stocks to buy bonds. I buy bonds with 40% of my new funds for investment at my workplace savings plan. My IRA contributions this year have been 100% bonds. I also get dividends from my brokerage investments and I am using those to purchase bonds as well.

Why am I buying bonds now even though I don't think they are good value? Because I am getting older and need to reduce the risk of my portfolio. I am pretty stock heavy for somebody my age. Though imperfect, bonds are still the best thing out there to balance out some of the risks from stocks. I still have (hopefully) 10 plus years working so I have a while to reinvest my dividends.

So I am doing what I need to in order to keep my risk profile in check. But I am not buying bonds with any great enthusiasm.
A fool and his money are good for business.

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Re: The Wilshire 5000 total market historic ups and downs

Post by meowcat » Mon Aug 19, 2013 6:17 am

Dog_Papa wrote:If you take a look at this chart of Wiki:http://en.wikipedia.org/wiki/Wilshire_5000. I believe we could see some very big dips again. Like in 2002 and 2009.
It would appear, that the total stock market has had trouble holding on to big gains made in the past. There are clearly two spikes, followed by exponential declines.

I'm just wondering what will happen when interest rates come back to reality. By that I mean, a rate of interest that would attract investors willing to buy bonds
that have risk in them. Whether you look at interest rates as the risk free rate, plus a premium risk, along with other factors. Like a figure for the length of the
bonds time period and reinvestment risk. Or, inflation plus a real rate of return and a risk premium.

Looking for patterns in market history charts to determine which way it's headed in the future is the surest way to lose your shirt. It can't be done. Investors have been looking for patterns in charts for a hundred years, it never works. I was in 100% equities in 2000 and in 2008. I held tight. Where am I today? As far as returns go, let's just say I'm better off than any investor who sold during those periods.
More people should learn to tell their dollars where to go instead of asking them where they went. | -Roger Babson

gvsucavie03
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Re: The Wilshire 5000 total market historic ups and downs

Post by gvsucavie03 » Mon Aug 19, 2013 7:40 am

I bet if you zoom in on any 20-30 year period you would see these spikes and drops. It looks dramatic because a 20% drop looks much bigger after 2000 than a 20% drop back in 1900. It's still the exact same relative drop in the index, but because its based on a much larger number today, it could make someone who listens to noise all day long try to time the "drop" - which none of us can accurately predict. I think the hope that us BH's have is that we ride up and down enough of them to make it a nice smooth climb towards investment success.

Also, as Taylor and others have noted, this is a flawed representation of the index and real dollars anyway.

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Re: The Wilshire 5000 total market historic ups and downs

Post by pkcrafter » Mon Aug 19, 2013 12:32 pm

I believe we could see some very big dips again.

I can beat that: I guarantee we will see some very bid dips again.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Dog_Papa
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Re: The Wilshire 5000 total market historic ups and downs

Post by Dog_Papa » Mon Aug 19, 2013 12:49 pm

This is just a thought. If you had a brokerage account, with mutual funds, like Vanguard GNMA. You could put in limit order to buy some VTI, if it drops say 20%.
Along with an order to buy even more if it drops 30%. If these events don't take place at least ya get some interest. In the past, it was patients and discipline
that would have worked. With the problems the US face down the road, that the average person does not know about, I really feel some more downside activity
is in the future. The questions is how to take advantage.

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Taylor Larimore
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Rebalance

Post by Taylor Larimore » Mon Aug 19, 2013 3:14 pm

Papa:
The questions is how to take advantage.

The answer is: Rebalance to your long-term asset-allocation plan.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Rebalance

Post by The Wizard » Mon Aug 19, 2013 3:26 pm

Taylor Larimore wrote:Papa:
The questions is how to take advantage.

The answer is: Rebalance to your long-term asset-allocation plan.

Best wishes.
Taylor

Yes, it's not about timing in advance to predict the future but more about "taking advantage" of (painful) price cuts to maintain your investment profile...
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Re: The Wilshire 5000 total market historic ups and downs

Post by nisiprius » Mon Aug 19, 2013 3:39 pm

Dog_Papa wrote:II'm just wondering what will happen when interest rates come back to reality. By that I mean, a rate of interest that would attract investors willing to buy bonds that have risk in them. Whether you look at interest rates as the risk free rate, plus a premium risk, along with other factors. Like a figure for the length of the bonds time period and reinvestment risk. Or, inflation plus a real rate of return and a risk premium.
Just to be perfectly clear, and since I happened to post chart in another thread just this morning, you say "when" interest rates come back to reality.

There is a case to be made that this process is well under way.. Anyone's guess how much further it has to go. You tell me what interest rate represents "reality." Anyone's guess whether bank CDs might not be as good or better than bond funds. But the interest rates that matter to me have already risen.

Vanguard Total Bond Fund have an average maturity of 7.3 years, and other "core" bond funds are similar. what matters is not the rate set by the Fed, which is the rate for overnight loans, but the 7-year interest rate, more than doubled from 1.07% to 2.18%:, and that isn't out of line with the 1.93% SEC yield for Total Bond

Image

And meanwhile, the "risk free rates" that matters to me are what my ING Direct bank account pays--which is still 0.75% and hasn't budged in a year--and my local bank's "reward checking" rate, which is still 1.25% and not only hasn't budged, but they've cut the amount on which they pay that rate from $25,000 to $10,000. So, in a rough sort of way, yeah, the "risk premium" for me to invest in Total Bond rather than my bank savings accounts has widened.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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