Revisiting the "Lost Decade," 2000-2009

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SimpleGift
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Revisiting the "Lost Decade," 2000-2009

Post by SimpleGift »

Seems like there are quite a few Forum posts lately expressing regret, disappointment, fear-of-missing out, etc. by investors lamenting they have not been more fully allocated to U.S. large cap stocks, and U.S. large tech stocks in particular. Of course, these stocks are the darlings of the world today, far surpassing the performance of small cap stocks, value stocks and international equity.

But this has not always been the case, as recently as the 2000-2009 "lost decade" for U.S. large cap stocks:
The reason diversification is a basic tenet of the Boglehead buy-and-hold philosophy is that one’s investing career is likely to be multi-decades long, far longer than anyone can envision or predict what the "best" investments will be. In short, there’s a reason we are encouraged to diversify broadly and then stay the course toward one’s goals.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by rogue_economist »

The "lost decade" is very much an example of choosing dates to get a very particular outcome.

Just using portfolio visualizer and 100% US Total Stock.

10k invested in Jan 2000 - Dec 2009 declined in real terms to $7585.

But 10k invested Jan 1999 - Dec 2010 ended at $10,551, a very small real return, but at least the spending power was preserved.

Measuring peak to trough can get a worst case scenario, but it is almost as meaningless as measuring trough to peak. Only if someone needs to withdraw the full portfolio at a given time does this type of measure become really important.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by jarjarM »

Thank you for posting this, it does seem like we're in need of a reminder why stock doesn't always go up and why bond/emergency funds can be useful. :beer
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Claudia Whitten »

SimpleGift wrote: Mon Jul 08, 2024 12:19 pm The reason diversification is a basic tenet of the Boglehead buy-and-hold philosophy is that one’s investing career is likely to be multi-decades long, far longer than anyone can envision or predict what the "best" investments will be. In short, there’s a reason we are encouraged to diversify broadly and then stay the course toward one’s goals.
Which is why I see the most sense in Vanguard Total World Stock Index Fund (VT/VTWAX) for one's stock allocation. Anything else is market timing, rear-view mirror investing, home country bias, or an amazing ability to predict the future. :wink:
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Re: Revisiting the "Lost Decade," 2000-2009

Post by abc132 »

Investing heavily in stocks before and through 2000-2009 was one of the best financial decisions I made.

Fixating on a lost decade is the worst way to invest. Those of US that invested through 2000-2009 haven't forgotten or lost our senses. We aren't going to regret investing in stocks because of some overstated period of underperformance or because of the next downturn.

One should be aware that stocks do not have to deliver but one should also be aware of how beneficial it has been to avoid this kind of thinking and to use stocks to help one's portfolios. We can't avoid a 2000-2009 sequence so we may as well benefit from it by investing in stocks in accumulation and thinking about de-risking only as we approach our goals. Diversification becomes important once we have a portfolio to protect at 10-15x expenses - just before we need de-risking. Before that keep it simple with a small number of investments - your age 20-30 self may not yet know what your age 50-70 self will want.
Last edited by abc132 on Mon Jul 08, 2024 2:04 pm, edited 1 time in total.
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SimpleGift
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Re: Revisiting the "Lost Decade," 2000-2009

Post by SimpleGift »

jarjarM wrote: Mon Jul 08, 2024 12:34 pm Thank you for posting this, it does seem like we're in need of a reminder why stock doesn't always go up and why bond/emergency funds can be useful. :beer
In the midst of a bull market in stocks, especially one driven by a specific sector or industry, it can be easy to think "Oh, the market is fundamentally and permanently changing — and I’m missing out with my investments!" Looking back over history, specific sectors of the market have at times been overwhelmingly dominant for certain periods, whether railroad stocks in the 19th century, energy companies or Japanese stocks in the 20th century, or tech companies in the 21st century.

But "trees don’t grow to the sky," as the saying goes. The market changes in unpredictable ways. One proven way to deal with this unpredictability and uncertainty over the span of decades is to start with a sound plan, diversify broadly, and then stick with it. Otherwise, those little voices coming from your collective unconscious can easily lead to market timing and ruin.
Last edited by SimpleGift on Mon Jul 08, 2024 2:07 pm, edited 1 time in total.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by rockstar »

Better off being an optimist than a pessimist.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by pascalwager »

I also had six of the asset classes on your table other than the large cap U.S. market, so I did manage a small positive return; but it still felt like a wasted decade as I was running a deferred-comp XIRR during the last few days of my working career at the end of 2011. Then, after completing a rollover to a Vanguard IRA, I began a new, entirely self-managed investment effort and mostly forgot about the lost decade.

However, for a few minutes that day, it was a bit disconcerting, even if soon forgotten.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by pennsylvania211 »

Lost decade is a matter of perspective. For sellers, yes it was a bad time. For buyers, it was a great decade to buy stocks at relatively stable price while their incomes generally increased as their careers progressed. It’s probably why generation X is the richest generation for their age in inflation adjusted dollars.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by unwitting_gulag »

SimpleGift wrote: Mon Jul 08, 2024 2:03 pm
jarjarM wrote: Mon Jul 08, 2024 12:34 pm Thank you for posting this, it does seem like we're in need of a reminder why stock doesn't always go up and why bond/emergency funds can be useful. :beer
In the midst of a bull market in stocks, especially one driven by a specific sector or industry, it can be easy to think "Oh, the market is fundamentally and permanently changing — and I’m missing out with my investments!" Looking back over history, specific sectors of the market have at times been overwhelmingly dominant for certain periods, whether railroad stocks in the 19th century, energy companies or Japanese stocks in the 20th century, or tech companies in the 21st century.
Small-caps or international weren't exactly superstars during the 2000-2009 Lost Decade. And that's the core lesson that I draw.... diversification tamps volatility, but doesn't increase cumulative gains. Even with a Lost Decade, US large-caps still outperformed, over a 30+ year period. There will come a time again when they underperform, perhaps a protracted time. But my hunch is that if we wait long enough past that time, then again US large-caps will outperform. Think of is as a small-cap anti-premium.

Indeed, one of my own investment regrets over the past 30+ years, is that I bought into the maxim, that because small caps are riskier, there's rightfully a risk premium... over sufficiently long period, they cumulatively gain more. In my lifetime this hasn't been true. I am not optimistic that it ever will be.

What the Lost Decade did most emphatically teach us, is to not be too ebullient, or to believe that markets only rise. Be more circumspect about what to expect. But if there's a lesson favoring diversification across the different classes of equities (instead of equities vs. bonds or cash - a very different topic entirely!) - then no, I've not learned my lesson.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by greedygus »

rogue_economist wrote: Mon Jul 08, 2024 12:27 pm The "lost decade" is very much an example of choosing dates to get a very particular outcome.
Definitely agree, it just seems like a random accident of history that one natural way to count decades starts right before one crash, and ends right after the next crash. To the extent that people mentally file the 2000's as a "lost decade" and let that influence thinking, it seems like a fairly significant mistake. Both of these crashes/corrections had large run-ups preceding them, and throughout most of the time between, the stock market was climbing as usual (benefiting accumulators as expected).
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Nathan Drake »

unwitting_gulag wrote: Mon Jul 08, 2024 5:50 pm
SimpleGift wrote: Mon Jul 08, 2024 2:03 pm
jarjarM wrote: Mon Jul 08, 2024 12:34 pm Thank you for posting this, it does seem like we're in need of a reminder why stock doesn't always go up and why bond/emergency funds can be useful. :beer
In the midst of a bull market in stocks, especially one driven by a specific sector or industry, it can be easy to think "Oh, the market is fundamentally and permanently changing — and I’m missing out with my investments!" Looking back over history, specific sectors of the market have at times been overwhelmingly dominant for certain periods, whether railroad stocks in the 19th century, energy companies or Japanese stocks in the 20th century, or tech companies in the 21st century.
Small-caps or international weren't exactly superstars during the 2000-2009 Lost Decade. And that's the core lesson that I draw.... diversification tamps volatility, but doesn't increase cumulative gains. Even with a Lost Decade, US large-caps still outperformed, over a 30+ year period. There will come a time again when they underperform, perhaps a protracted time. But my hunch is that if we wait long enough past that time, then again US large-caps will outperform. Think of is as a small-cap anti-premium.

Indeed, one of my own investment regrets over the past 30+ years, is that I bought into the maxim, that because small caps are riskier, there's rightfully a risk premium... over sufficiently long period, they cumulatively gain more. In my lifetime this hasn't been true. I am not optimistic that it ever will be.

What the Lost Decade did most emphatically teach us, is to not be too ebullient, or to believe that markets only rise. Be more circumspect about what to expect. But if there's a lesson favoring diversification across the different classes of equities (instead of equities vs. bonds or cash - a very different topic entirely!) - then no, I've not learned my lesson.
Small cap value, small cap value DM, and EM markets all did significantly better precisely because valuations were not stretched

Market cap weighting got crushed because global CAPE was 40
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Re: Revisiting the "Lost Decade," 2000-2009

Post by gavinsiu »

What investing is that even thought the last decade was negative in return, it is not negative if you contributed regularly. Let's say you started with $100K in 2000. In 2009, you will have $97K and have a inflation adjusted Annualized Return (CAGR) of -2.73%. See link. However if you contribute $10K a year inflation adjusted, your return will be 5.71% see Link. it's not the lost decade if you were invest regularly an maintain your portfolio's allocation.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by AlmstRtrd »

2000 to 2012 was actually a "lost 13 years" in inflation-adjusted terms, even with dividends reinvested. See here:

https://totalrealreturns.com/s/VFINX?st ... 2013-01-01

Indeed one has to go out to the middle of 2013 before the overall return of the S&P 500 becomes positive from a starting point of 1/1/2000.

Yes, the start date is cherry picked but real human investors had to keep deciding to stick with stocks for a LONG time before they enjoyed the ensuing positive returns.

For stock-heavy investors 2000 was a brutal time to retire and start living off of a portfolio.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by FrankLUSMC »

pennsylvania211 wrote: Mon Jul 08, 2024 5:26 pm Lost decade is a matter of perspective. For sellers, yes it was a bad time. For buyers, it was a great decade to buy stocks at relatively stable price while their incomes generally increased as their careers progressed. It’s probably why generation X is the richest generation for their age in inflation adjusted dollars.
++2

Wife and I were at our peak earning years during that time. Maxed out 401K and getting +50 catch up and great company matching.
Was a great time to buy then.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by GoldenFinch »

The lost decade was the time to be regularly buying the S&P.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by KlangFool »

Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

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Re: Revisiting the "Lost Decade," 2000-2009

Post by markus75 »

Nathan Drake wrote: Mon Jul 08, 2024 5:53 pm
Small cap value, small cap value DM, and EM markets all did significantly better precisely because valuations were not stretched

Market cap weighting got crushed because global CAPE was 40
Streched valuations is only the simplest explanation, but not the whole truth.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Trance »

I'll contribute to this and say that the PE ratio for the S&P is very interesting across this time period. While the stock returns were essentially zero, the fundamentals slowly decreased and returned to the mean.

Image

You can see the PE ratio start near 35, fluctuate all over the place, but slowly trend downwards and finish below 15 when the "lost decade" is over.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by tibbitts »

KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
I suspect there is a large degree of optimistic bias on Bogleheads, partly because of survivorship bias. For example I'm pretty sure that most people who never recovered in the career sense from 2000 or 2008/9 simply aren't here, because they don't have the "problems" with investments etc. that are commonly discussed here.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by AlmstRtrd »

KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yes. While not totally unemployed, my wife and I (two different sole proprietorships) operated at about 60% of normal for all of 2009 & 2010. My business never fully recovered after the GFC. I was able to retire in 2018 but wife's business (which is a service that has to be performed in person) lost the equivalent of 16-18 months of income due to the pandemic (you can't work if people don't want you showing up). Now, at ages 65 & 57 we now have a lot of our assets in I-bonds, nominal treasuries & TIPS.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by gavinsiu »

KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Good point, the early 2000 was pure hell as I attempt to stay employed. However, not everyone's job was affected.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by AlmstRtrd »

gavinsiu wrote: Tue Jul 09, 2024 7:50 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Good point, the early 2000 was pure hell as I attempt to stay employed. However, not everyone's job was affected.
While that period did not affect my sole proprietorship too drastically. Plus I held almost no stocks so didn't suffer through that huge 2000-2002 drawdown. However, see my post before yours about the GFC & the pandemic.

Very helpful to get perspectives from a lot of people so that we can more clearly picture potential adverse outcomes.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by ROIGuy »

What I think made a big difference for my DW and myself during those years is that we were employed. My DW did take a little bit of a pay cut a couple times, but not having to draw down on any retirement funds or even our emergency fund and just keep adding to our savings to our retirement funds, even if it wasn't maxed out really made a difference in the long run.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by bikeeagle1 »

AlmstRtrd wrote: Tue Jul 09, 2024 6:13 am 2000 to 2012 was actually a "lost 13 years" in inflation-adjusted terms, even with dividends reinvested. See here:

https://totalrealreturns.com/s/VFINX?st ... 2013-01-01

Indeed one has to go out to the middle of 2013 before the overall return of the S&P 500 becomes positive from a starting point of 1/1/2000.
Great point. How long was it until the S&P 500 recovered to match the 10% annual return often planned for?
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Re: Revisiting the "Lost Decade," 2000-2009

Post by AlmstRtrd »

bikeeagle1 wrote: Tue Jul 09, 2024 8:21 am
AlmstRtrd wrote: Tue Jul 09, 2024 6:13 am 2000 to 2012 was actually a "lost 13 years" in inflation-adjusted terms, even with dividends reinvested. See here:

https://totalrealreturns.com/s/VFINX?st ... 2013-01-01

Indeed one has to go out to the middle of 2013 before the overall return of the S&P 500 becomes positive from a starting point of 1/1/2000.
Great point. How long was it until the S&P 500 recovered to match the 10% annual return often planned for?
That has not happened yet. It's not even very close. Just played around with that link I posted above, and from 1/1/2000 through 7/8/2024, the nominal total return is 486.41% for a nominal CAGR of 7.48%. The numbers in real dollars are a gain of 213.20% total which works out to 4.77% per year.

I think people frequently use 10% nominal and 7% real as general guidelines.

To reiterate, I intentionally cherry picked an unfavorable start date.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Catalina25 »

As I was relatively early in my accumulation phase during 2000-2009, and knowing that markets will eventually recover, my focus wasn’t on the investments made prior to 2000, but rather the new money invested during those down years. I didn’t pay attention to quarterly/annual returns or account balances, nor did I care as I wouldn’t need this money for a few decades. As I plowed as much as I could into stocks then, including moving my bond funds/fixed income into stocks (the beginning of my going 100% equities), the seeds planted then have blossomed wonderfully.

In contrast, some of my same age co-workers at the time were so distressed during those years, focusing instead on annual returns, short term gains, etc., they moved everything out of stocks and into fixed income hoping to preserve capital or chase rather modest short-term gains. Obviously, not a good strategy.

2000-2009 (or really through 2012) wasn’t a lost decade for me, but probably one of the greatest long term buying opportunities of my lifetime. Having recently retired, I can’t thank my optimistic younger self enough for not taking his eyes off the prize.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by BitTooAggressive »

unwitting_gulag wrote: Mon Jul 08, 2024 5:50 pm
SimpleGift wrote: Mon Jul 08, 2024 2:03 pm
jarjarM wrote: Mon Jul 08, 2024 12:34 pm Thank you for posting this, it does seem like we're in need of a reminder why stock doesn't always go up and why bond/emergency funds can be useful. :beer
In the midst of a bull market in stocks, especially one driven by a specific sector or industry, it can be easy to think "Oh, the market is fundamentally and permanently changing — and I’m missing out with my investments!" Looking back over history, specific sectors of the market have at times been overwhelmingly dominant for certain periods, whether railroad stocks in the 19th century, energy companies or Japanese stocks in the 20th century, or tech companies in the 21st century.
Small-caps or international weren't exactly superstars during the 2000-2009 Lost Decade. And that's the core lesson that I draw.... diversification tamps volatility, but doesn't increase cumulative gains. Even with a Lost Decade, US large-caps still outperformed, over a 30+ year period. There will come a time again when they underperform, perhaps a protracted time. But my hunch is that if we wait long enough past that time, then again US large-caps will outperform. Think of is as a small-cap anti-premium.

Indeed, one of my own investment regrets over the past 30+ years, is that I bought into the maxim, that because small caps are riskier, there's rightfully a risk premium... over sufficiently long period, they cumulatively gain more. In my lifetime this hasn't been true. I am not optimistic that it ever will be.

What the Lost Decade did most emphatically teach us, is to not be too ebullient, or to believe that markets only rise. Be more circumspect about what to expect. But if there's a lesson favoring diversification across the different classes of equities (instead of equities vs. bonds or cash - a very different topic entirely!) - then no, I've not learned my lesson.
International small cap value almost returned about 190%. That’s a lot better than a 10% loss. That is significant.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by ClevrChico »

KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Excellent reminder. After finding employment, I doubt many were in a position to invest a lot in the market. I spent several years building up my cash emergency fund. I did contribute some to my 401k, but it felt like burning my money, as my balance wasn't growing despite contributions.
Last edited by ClevrChico on Tue Jul 09, 2024 9:51 am, edited 1 time in total.
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SimpleGift
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Re: Revisiting the "Lost Decade," 2000-2009

Post by SimpleGift »

Trance wrote: Tue Jul 09, 2024 6:35 am I'll contribute to this and say that the PE ratio for the S&P is very interesting across this time period. While the stock returns were essentially zero, the fundamentals slowly decreased and returned to the mean.
Good observation. Digging a little deeper, it’s remarkable how much of the broad market’s decrease in P/E during the 2000s was due to the decline in valuations of the tech sector alone (in blue, chart below).
Though not nearly to the same extent, we once again find ourselves in a place where the broad market’s P/E is being driven largely by rising tech sector valuations.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by BitTooAggressive »

Nathan Drake wrote: Mon Jul 08, 2024 5:53 pm
unwitting_gulag wrote: Mon Jul 08, 2024 5:50 pm
SimpleGift wrote: Mon Jul 08, 2024 2:03 pm
jarjarM wrote: Mon Jul 08, 2024 12:34 pm Thank you for posting this, it does seem like we're in need of a reminder why stock doesn't always go up and why bond/emergency funds can be useful. :beer
In the midst of a bull market in stocks, especially one driven by a specific sector or industry, it can be easy to think "Oh, the market is fundamentally and permanently changing — and I’m missing out with my investments!" Looking back over history, specific sectors of the market have at times been overwhelmingly dominant for certain periods, whether railroad stocks in the 19th century, energy companies or Japanese stocks in the 20th century, or tech companies in the 21st century.
Small-caps or international weren't exactly superstars during the 2000-2009 Lost Decade. And that's the core lesson that I draw.... diversification tamps volatility, but doesn't increase cumulative gains. Even with a Lost Decade, US large-caps still outperformed, over a 30+ year period. There will come a time again when they underperform, perhaps a protracted time. But my hunch is that if we wait long enough past that time, then again US large-caps will outperform. Think of is as a small-cap anti-premium.

Indeed, one of my own investment regrets over the past 30+ years, is that I bought into the maxim, that because small caps are riskier, there's rightfully a risk premium... over sufficiently long period, they cumulatively gain more. In my lifetime this hasn't been true. I am not optimistic that it ever will be.

What the Lost Decade did most emphatically teach us, is to not be too ebullient, or to believe that markets only rise. Be more circumspect about what to expect. But if there's a lesson favoring diversification across the different classes of equities (instead of equities vs. bonds or cash - a very different topic entirely!) - then no, I've not learned my lesson.
Small cap value, small cap value DM, and EM markets all did significantly better precisely because valuations were not stretched

Market cap weighting got crushed because global CAPE was 40
Exactly. I find myself agreeing with almost all your posts. They data clearly shows the benefits of diversification into different segments of the worldwide equity market.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by BitTooAggressive »

KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Nathan Drake »

BitTooAggressive wrote: Tue Jul 09, 2024 9:59 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
What’s interesting is the suggestion that those buying another “lost decade” asset at lower prices, such as exUS now, are doing something foolhardy because US will always return more in their minds no matter the valuation gulf.

S&P500 has fortuitously seen valuations in 2000 at 44 rise back up to 36 in 2024 rather than the far more severe and sustained contraction in exUS valuations
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Re: Revisiting the "Lost Decade," 2000-2009

Post by BitTooAggressive »

Nathan Drake wrote: Tue Jul 09, 2024 10:04 am
BitTooAggressive wrote: Tue Jul 09, 2024 9:59 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
What’s interesting is the suggestion that those buying another “lost decade” asset at lower prices, such as exUS now, are doing something foolhardy because US will always return more in their minds no matter the valuation gulf.

S&P500 has fortuitously seen valuations in 2000 at 44 rise back up to 36 in 2024 rather than the far more severe and sustained contraction in exUS valuations
I don’t understand the logic either. Jack Bogle believed in reversion to a mean, which is just another way of stating valuations matter.

I suppose it gets back to Jack liked the SP500 so that is what I like. He did not like international so I don’t either.

Valuations matter inside the US and outside. Now when corrections because of valuations happen is hard to say because there is a lot of noise in markets and human behavior I suppose.
unwitting_gulag
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Re: Revisiting the "Lost Decade," 2000-2009

Post by unwitting_gulag »

Nathan Drake wrote: Tue Jul 09, 2024 10:04 am
BitTooAggressive wrote: Tue Jul 09, 2024 9:59 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
What’s interesting is the suggestion that those buying another “lost decade” asset at lower prices, such as exUS now, are doing something foolhardy because US will always return more in their minds no matter the valuation gulf.

S&P500 has fortuitously seen valuations in 2000 at 44 rise back up to 36 in 2024 rather than the far more severe and sustained contraction in exUS valuations
My personal worry, is that during the next recession (to borrow Klangfool's quip), all equities will fall, more or less equally. There won't be any place to hide. High-fliers with PE of 50 will be knocked down to 25. "Value" stocks with a PE of 7, will be knocked down to 3.5. AI stocks and stodgy consumer cyclicals will fall just the same. ex-US will fall just as much as US (perhaps more; recall the GFC?). Thus diversification, dilutes our gains during fat years, but won't protect us from losses, during lean years.
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like2read
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Re: Revisiting the "Lost Decade," 2000-2009

Post by like2read »

Great post SimpleGift, thanks.

Your chart of investment returns for various asset classes between 2000 - 2009 is it brilliant reminder of the value of diversification. Longer-term market history like this makes it much more apparent that the proper choice is to hold a diversified portfolio.
Nathan Drake
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Nathan Drake »

unwitting_gulag wrote: Tue Jul 09, 2024 11:08 am
Nathan Drake wrote: Tue Jul 09, 2024 10:04 am
BitTooAggressive wrote: Tue Jul 09, 2024 9:59 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
What’s interesting is the suggestion that those buying another “lost decade” asset at lower prices, such as exUS now, are doing something foolhardy because US will always return more in their minds no matter the valuation gulf.

S&P500 has fortuitously seen valuations in 2000 at 44 rise back up to 36 in 2024 rather than the far more severe and sustained contraction in exUS valuations
My personal worry, is that during the next recession (to borrow Klangfool's quip), all equities will fall, more or less equally. There won't be any place to hide. High-fliers with PE of 50 will be knocked down to 25. "Value" stocks with a PE of 7, will be knocked down to 3.5. AI stocks and stodgy consumer cyclicals will fall just the same. ex-US will fall just as much as US (perhaps more; recall the GFC?). Thus diversification, dilutes our gains during fat years, but won't protect us from losses, during lean years.
During a global recession, sure, assets tend to be correlated for acute events.

Coming out of recession is a completely different matter. US did not recover quickly after the dot com era, other assets with lower valuations rebounded much more quickly
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
BitTooAggressive
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Re: Revisiting the "Lost Decade," 2000-2009

Post by BitTooAggressive »

unwitting_gulag wrote: Tue Jul 09, 2024 11:08 am
Nathan Drake wrote: Tue Jul 09, 2024 10:04 am
BitTooAggressive wrote: Tue Jul 09, 2024 9:59 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
What’s interesting is the suggestion that those buying another “lost decade” asset at lower prices, such as exUS now, are doing something foolhardy because US will always return more in their minds no matter the valuation gulf.

S&P500 has fortuitously seen valuations in 2000 at 44 rise back up to 36 in 2024 rather than the far more severe and sustained contraction in exUS valuations
My personal worry, is that during the next recession (to borrow Klangfool's quip), all equities will fall, more or less equally. There won't be any place to hide. High-fliers with PE of 50 will be knocked down to 25. "Value" stocks with a PE of 7, will be knocked down to 3.5. AI stocks and stodgy consumer cyclicals will fall just the same. ex-US will fall just as much as US (perhaps more; recall the GFC?). Thus diversification, dilutes our gains during fat years, but won't protect us from losses, during lean years.
Some will do better than others. Some countries will do better than others.

Short term, high quality bonds should be in your portfolio if in or approaching retirement for this scenario.
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whodidntante
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Re: Revisiting the "Lost Decade," 2000-2009

Post by whodidntante »

I do declare that bonds are worth owning again, at least in tax advantaged accounts. And that US stocks, growth stocks, and large cap stocks do not always trounce everything else.
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FrankLUSMC
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Re: Revisiting the "Lost Decade," 2000-2009

Post by FrankLUSMC »

BitTooAggressive wrote: Tue Jul 09, 2024 9:59 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
UMMMM , I won't say what I really feel about your statement.
Yes there are many people and many ways people missed investing in the lost decade. Some died in 1999, some born in 2011, some unemployed during portions of that period.
If you could and did take advantage of that period, then good for you. Nothing militant about it.
BitTooAggressive
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Re: Revisiting the "Lost Decade," 2000-2009

Post by BitTooAggressive »

FrankLUSMC wrote: Tue Jul 09, 2024 1:22 pm
BitTooAggressive wrote: Tue Jul 09, 2024 9:59 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
UMMMM , I won't say what I really feel about your statement.
Yes there are many people and many ways people missed investing in the lost decade. Some died in 1999, some born in 2011, some unemployed during portions of that period.
If you could and did take advantage of that period, then good for you. Nothing militant about it.
Say what you think. You can be direct without being rude?
gavinsiu
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Re: Revisiting the "Lost Decade," 2000-2009

Post by gavinsiu »

I think there are two parts to this discussion: one part is about investing through the lost decade and another is to live through the lost decade. There is some interaction between the two. Some people will lose their job and can't invest through the lost decade. Some will retire during the lost decade and may have to reduce their spending.

One thing is that how unpredictable it was. Back in the 90's things were flying high. I was working tons of overtime on Y2K projects. Despite my crappy pain during that time period, my portfolio was growing insanely first in double-digits, then it all comes crashing down. There were probably a lot of zeros in investing during the 2000 to 2003. This isn't universally experience by everyone as indicated by this thread.

If the same thing happens again, I wonder if I would contemplate just retiring early. What would stop me is that I still have kids to take care of. Most of my friends my age have kids in college or graduated from college. It's not just the money. In my single days, I could just move to where the job is. My wife has tenure so I can't just do that. My parents also moved when I was a kid, and the experience wasn't all that positive.

My goal is to try to stay employable so that I can continue working. Try super hard to never withdraw the retirement assets. This mean I need to have a sufficient EF for say a year or so and hope that severance + unemployment + spouse's income will get me through it.
pennsylvania211
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Re: Revisiting the "Lost Decade," 2000-2009

Post by pennsylvania211 »

FrankLUSMC wrote: Tue Jul 09, 2024 1:22 pm UMMMM , I won't say what I really feel about your statement.
Yes there are many people and many ways people missed investing in the lost decade. Some died in 1999, some born in 2011, some unemployed during portions of that period.
If you could and did take advantage of that period, then good for you. Nothing militant about it.
I think that you're being baited into a pointless argument.

As your own story demonstrates, even "lost decade" for someone was a "wonderful decade" for someone else. It depends on perspective.
Florida Orange
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Florida Orange »

unwitting_gulag wrote: Mon Jul 08, 2024 5:50 pm because small caps are riskier, there's rightfully a risk premium
In theory the risk premium should be commensurate with the increased volatility, thus leaving the investor with neither an advantage nor a disadvantage relative to less volatile assets in the long run. But determining the risk premium involves judgement and predictions about the future, so it's not always very accurate and it's sometimes very inaccurate.
bikeeagle1
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Re: Revisiting the "Lost Decade," 2000-2009

Post by bikeeagle1 »

AlmstRtrd wrote: Tue Jul 09, 2024 8:34 am
bikeeagle1 wrote: Tue Jul 09, 2024 8:21 am
AlmstRtrd wrote: Tue Jul 09, 2024 6:13 am 2000 to 2012 was actually a "lost 13 years" in inflation-adjusted terms, even with dividends reinvested. See here:

https://totalrealreturns.com/s/VFINX?st ... 2013-01-01

Indeed one has to go out to the middle of 2013 before the overall return of the S&P 500 becomes positive from a starting point of 1/1/2000.
Great point. How long was it until the S&P 500 recovered to match the 10% annual return often planned for?
That has not happened yet. It's not even very close. Just played around with that link I posted above, and from 1/1/2000 through 7/8/2024, the nominal total return is 486.41% for a nominal CAGR of 7.48%. The numbers in real dollars are a gain of 213.20% total which works out to 4.77% per year.

I think people frequently use 10% nominal and 7% real as general guidelines.

To reiterate, I intentionally cherry picked an unfavorable start date.
Understood on the cherry-picking. I came to the same conclusions you did.

The point I was trying to make with my question was that a "lost decade," while it sounds bad enough, isn't the whole story. When a retiree is planning for an asset class to meet certain long-term return goals, and that asset class suffers a long period of lower than average returns, then a lost decade can become a lost two or three decades before asset class catches up with its normal trend.

With many people retiring or planning to retire over the next few years, and who suddenly find themselves (barely) able to meet their goals thanks to the recent market run-up, this is a concern that should be factored in to the "do I have enough" decision.
sambb
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Re: Revisiting the "Lost Decade," 2000-2009

Post by sambb »

Cherry picking dates doesn’t work for most investors. Sequence of returns risk is real but arbitrary start and end dates that match with a calendar year or decade are harder for practical reasons. Most investors aren’t looking at exact dates that correspond to beginning and end of a decade. Certainly true that stocks can be flat over 10-20 years. Would focus on saving Money in those years.
Normchad
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Normchad »

I loved the lost decade. It probably accounts for more of my current wealth than anything else.

It bemuses me that it’s called the “the lost decade”, because I think of it as the best investment period of my lifetime.

I did t do anything special at all. Just kept buying with every paycheck. And glad to see that prices were t going up.

Never understood why “accumulators” get all happy when prices go up.
Dottie57
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Dottie57 »

rogue_economist wrote: Mon Jul 08, 2024 12:27 pm The "lost decade" is very much an example of choosing dates to get a very particular outcome.

Just using portfolio visualizer and 100% US Total Stock.

10k invested in Jan 2000 - Dec 2009 declined in real terms to $7585.

But 10k invested Jan 1999 - Dec 2010 ended at $10,551, a very small real return, but at least the spending power was preserved.

Measuring peak to trough can get a worst case scenario, but it is almost as meaningless as measuring trough to peak. Only if someone needs to withdraw the full portfolio at a given time does this type of measure become really important.
But it is also true I felt like I wasn’t getting anywher in my 401k and then the GFC occurred, i wondered at that time if I would ever be able to retire.
Trance
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Trance »

Dottie57 wrote: Tue Jul 09, 2024 7:55 pm
rogue_economist wrote: Mon Jul 08, 2024 12:27 pm The "lost decade" is very much an example of choosing dates to get a very particular outcome.

Just using portfolio visualizer and 100% US Total Stock.

10k invested in Jan 2000 - Dec 2009 declined in real terms to $7585.

But 10k invested Jan 1999 - Dec 2010 ended at $10,551, a very small real return, but at least the spending power was preserved.

Measuring peak to trough can get a worst case scenario, but it is almost as meaningless as measuring trough to peak. Only if someone needs to withdraw the full portfolio at a given time does this type of measure become really important.
But it is also true I felt like I wasn’t getting anywher in my 401k and then the GFC occurred, i wondered at that time if I would ever be able to retire.
That happened to my grandfather and its one of the reasons I feel like that quote is a bit disingenuous with claiming its a meaningless measure because he's still working to this day. (Not you, the person who said it). If one was to retire and a crash occurs then it can irreparably damage your retirement. Imagine if you're trying to retire in 2008 and you spend your last decade crawling your way back from the 2000 high only to be hit with the GFC and it tanks again. A decade of work only to reset. That's insanely painful.

Which is why the whole point of these "lost decade" examples is to educate people to protect ourselves from them. "Those who don't learn from history are doomed to repeat it." Asset allocation, diversification, these are incredibly important and people can forget them when performance chasing during a bubble. To this day I frequently see bogleheads under weighting international as an example because America has "out performed" from increased evaluations and a strengthening dollar. Both could reverse, as they have in the past, and suddenly you're over invested in the worst performing sector of the market for possibly a decade.
“The stock market is a device for transferring money from the impatient to the patient.” - Warren Buffet | Don't performance chase with America. Hold everything at market weight.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by WhitePuma »

The absence of a deep, prolonged recession for 15 years now has me worried. Recessions are a normal, healthy part of the economic cycle. The absence of such is in large part to blame for all the frothiness, FOMO, and entitlement that so rampant today. The system needs a good flush.
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