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Total Return From MMA Beats Wilshire 5000 T.R. From Year-End 1995
Old 03-01-2009, 10:58 AM   #1
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Total Return From MMA Beats Wilshire 5000 T.R. From Year-End 1995

According to Brett Arends of the WSJ-

"...the real measure of how you're doing as an investor also has to take into account another key issue: How much you would have made if you had just kept your money in a zero-risk investment, like a money market account.

I ran the numbers, and they aren't pretty.

I looked at total shareholder returns, which includes reinvested dividends, for the broad market Wilshire 5000 index. Then I looked at returns in a simply money market account, using data from iMoneyNet.

Bottom line?

"Long term" investors who got into the market after 1995 are pretty much out of luck. They would have done better over that time in a money market fund. "

Trying Times for Long-Term Investors - WSJ.com

Ha
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Old 03-01-2009, 11:50 AM   #2
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Yep, it is depressing. Still, market timing and tax considerations aside, which investor would be better off today: One who put everything in money market funds and has $100K in MM accounts today or the investor who put money in a diversified portfolio, has kept it there, and has $100K in a diversified portfolio today? Which is better positioned for long-term growth over the next few decades? Any of us could choose either position today by transferring our assets, but most are sticking with some equities and bonds.
So, despite the downturn, we still (in general) think the guy who chose to be in the market was right.
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Old 03-01-2009, 11:57 AM   #3
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Here is what Buffet wrote in his recent letter to shareholders (italics are mine):

Quote:
A few years ago, it would have seemed unthinkable that
yields like today’s could have been obtained on good-grade municipal
or corporate bonds even while
risk-free
governments offered near-zero returns on short-term bonds
and no better than a pittance on long-terms. When the
financial history of this decade is written, it will surely speak
of the Internet bubble of the late 1990s and the
housing bubble of the early 2000s. But the U.S. Treasury bond
bubble of late 2008 may be regarded as almost
equally extraordinary.

Clinging to cash equivalents or long-term government bonds
at present yields is almost certainly a
terrible policy if continued for long.
Holders of these instruments, of course,
have felt increasingly comfortable –
in fact, almost smug – in following this policy as financial turmoil
has mounted. They regard their judgment
confirmed when they hear commentators proclaim “cash is king,” even
though that wonderful cash is earning
close to nothing and will surely find its purchasing power eroded over time.
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Old 03-01-2009, 12:11 PM   #4
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Quote:
Originally Posted by haha View Post
According to Brett Arends of the WSJ-
Choosing one exact point in time to start to another to end plus extreme investment choices is a formula to produce the answer the author wants.
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Old 03-01-2009, 12:18 PM   #5
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Quote:
Originally Posted by dex View Post
Choosing one exact point in time to start to another to end plus extreme investment choices is a formula to produce the answer the author wants.
I am not endorsing any particular investment posture. This citation is descriptive, not proscriptive.

Ha
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Old 03-01-2009, 02:52 PM   #6
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Quote:
Originally Posted by haha View Post
I am not endorsing any particular investment posture. This citation is descriptive, not proscriptive.

Ha
I didn't mean to infer you were - I get annoyed with poor reporting.

If you want to get more depressed - see below.

Decision Point®: Chart Spotlight 2/27/2009
Hi Carl,
I really enjoy your service and have for about nine years. Thank you for all your hard work and dedication. I was wondering if you could tell me the potential technical "bottom" numbers for the Dow, S&P 500, and Nasdaq?
Thank you very much.

ANSWER: I don't follow the Nasdaq. I have rough targets of Dow 3000 and SPX 300 around late-2010. I wouldn't exactly call these "technical" targets -- I am guestimating a total decline of about 80%, using the 1929-1932 bear market 90% decline as a guide. The timing is based on the estimate for the next 4-Year Cycle low, which is due mid-to-late 2010.
While I can't swear by these estimates, I don't think I'm sticking my neck out too far.
Carl

http://www.tradingmarkets.com/.site/...ycle-rules.cfm
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Old 03-01-2009, 02:57 PM   #7
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Quote:
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I didn't mean to infer you were - I get annoyed with poor reporting.
I can understand. Lately is seems that a lot of stupid pills have been distributed.

Still, I see no problem with the WSJ article that I cited. He only reported what happened, during a particular span of time. What's the problem with that?

Ha
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Old 03-01-2009, 03:03 PM   #8
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Sooooo....... I would have been better of in a MM than equities since 1995. Kinda interesting. But what will I be better off investing in going forward? Now, that's really interesting!
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Old 03-02-2009, 07:12 PM   #9
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Yeah, the WSJ article is assuming that the investor could have sat still in MM all through the late '90s and '03 to '07. The real test of your commitment an AA is when everyone else is telling you you're a dumb ass not when everyone else is telling you how smart you are.
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Old 03-02-2009, 09:04 PM   #10
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Originally Posted by BunsGettingFirm View Post
Yeah, the WSJ article is assuming that the investor could have sat still in MM all through the late '90s and '03 to '07. The real test of your commitment an AA is when everyone else is telling you you're a dumb ass not when everyone else is telling you how smart you are.
As I see it, the author is not conducting a psychology experiement. He is just reporting an event. Similar to "NFL home dogs won against the spread in seasons 1997 through 2005".

He isn't assuming anything.

Ha
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Old 03-02-2009, 10:25 PM   #11
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Yeah but... zzzzz

The scenario you post is not typical of anyone I know. Sorta driveby media-ish.

How about running it again - pit a $500/mo investment in W5000 vs. MMA and then compare. That would be somewhat useful.
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