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Zero Day
Old 03-16-2008, 10:52 PM   #1
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Zero Day

March 10th was the market's "Zero Day," where dividend-adjusted returns from the Standard & Poor's 500 Index, the favored long-term benchmark for conservative investors -- registered a negative cumulative return for the decade so far. Put simply, millions of investors have been throwing good money after bad for more than eight years. End of Story.
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Old 03-16-2008, 10:58 PM   #2
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Put simply, millions of investors have been throwing good money after bad for more than eight years. End of Story.
Unless, of course, the investor in question has ventured beyond the S&P 500.
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Old 03-16-2008, 11:07 PM   #3
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OK, but what about folks who invested in January 2003?
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Old 03-16-2008, 11:24 PM   #4
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OK, but what about folks who invested in January 2003?
They won't hit zero until the end of the month(week?).
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Old 03-17-2008, 10:15 AM   #5
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I don't understand why this thread has drawn such little attention. My observations of the investing behavior of perhaps the majority of those who post is that it favors the old buy-and-hold, stocks-for-the-long-run mantra. While I also tend to hold my investments for periods of five years or longer, a few caveats are in order. First, the typical small investor continues to hold on average only 10% of their equity allocation in foreign stocks. Also, a truly diversified investment portfolio holds the sorts of asset classes encompassed in, for example, the Harvard and Yale endowment portfolios. These guys are the ultimate in long-term investors. It's an endowment, after all. If you are not familiar with these managers' investment strategy, Google them to learn how they define reality.

If you haven't done so already, please broaden your definition of diversification. The underperformance of US equities has been appalling.
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Old 03-17-2008, 10:22 AM   #6
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Originally Posted by boont View Post
March 10th was the market's "Zero Day," where dividend-adjusted returns from the Standard & Poor's 500 Index, the favored long-term benchmark for conservative investors -- registered a negative cumulative return for the decade so far. Put simply, millions of investors have been throwing good money after bad for more than eight years. End of Story.
Not even close for people who had allocations into small caps, REITs, international stocks and precious metals/materials. Those folks are considerably ahead.
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Old 03-17-2008, 10:23 AM   #7
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If you haven't done so already, please broaden your definition of diversification. The underperformance of US equities has been appalling.
Large cap US equities, specifically. From 2001 to 2006, US small cap -- particularly small cap value -- did quite well.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 03-17-2008, 12:42 PM   #8
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Old 03-17-2008, 01:03 PM   #9
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You will always be able to arbitrarily select points on a timescale that would have been unfortunate for buying and selling.
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Old 03-17-2008, 02:40 PM   #10
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If you haven't done so already, please broaden your definition of diversification. The underperformance of US equities has been appalling.
True, int'l has outperformed over the last several years. But YTD int'l has had more downside than US:

DJ -7.5&
NASDAQ -16.5%
S&P 500 -12.2%
-----------------
Nikkei -20%
DAX -20%
CAC 40 -18%

Your point is well taken, though, int'l diversification over the last several years would have beaten a US only portfolio.
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Old 03-17-2008, 03:31 PM   #11
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I like the part up til 2000.
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Old 03-17-2008, 03:59 PM   #12
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I don't understand why this thread has drawn such little attention.
I guess because:
1) The "Zero Day" scary label is just BS. Who thought of that? What is magic about 1 Jan 2000? Heck, we've been below zero tiem and again.
2) As others (and you) have mentioned, diversified portfolios haven't done as poorly.

So, this thread will be of great interest to those who:
-- Didn't know that diversifying was important
or
-- Thought large cap US stocks could only go up.

I think that's a small group of people on this board.
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Old 03-17-2008, 04:05 PM   #13
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Unless, of course, the investor in question has ventured beyond the S&P 500.
Or, if the investor went into an S&P index with a lump sum in January 2002, DCAed up to mid-August 2007 and out.
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Old 03-17-2008, 06:49 PM   #14
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I remember the first time I said "Wow, if I'd just put my money under the mattress I'd have more than I have now." I think that was around 1988.
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Old 03-17-2008, 11:03 PM   #15
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Originally Posted by boont View Post
March 10th was the market's "Zero Day," where dividend-adjusted returns from the Standard & Poor's 500 Index, the favored long-term benchmark for conservative investors -- registered a negative cumulative return for the decade so far. Put simply, millions of investors have been throwing good money after bad for more than eight years. End of Story.
Spreadsheet sez: time to buy more US stocks.
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Old 03-18-2008, 02:52 PM   #16
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Originally Posted by tomintucson View Post
I don't understand why this thread has drawn such little attention. My observations of the investing behavior of perhaps the majority of those who post is that it favors the old buy-and-hold, stocks-for-the-long-run mantra. While I also tend to hold my investments for periods of five years or longer, a few caveats are in order. First, the typical small investor continues to hold on average only 10% of their equity allocation in foreign stocks. Also, a truly diversified investment portfolio holds the sorts of asset classes encompassed in, for example, the Harvard and Yale endowment portfolios. These guys are the ultimate in long-term investors. It's an endowment, after all. If you are not familiar with these managers' investment strategy, Google them to learn how they define reality.

If you haven't done so already, please broaden your definition of diversification. The underperformance of US equities has been appalling.
Eh, you might want to read Swenson's book. He most definitely does not recommend the alternative assets Yale invest in for individual investors [timber, private equity, hegde funds, etc.]. IIRC, his recommended asset classes were:

1) a US TSM index Fund
2) a MSCI EAFE index fund
3) a REIT index fund
4) a TIPS bond fund
5) a IT/LT Treasury bond fund

btw - here's a cool site that'll let you see trailing total returns for mutual funds:

Stockcharts
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Old 03-18-2008, 06:36 PM   #17
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Pardon me, but as we haven't met, you might consider refraining from commenting on what I have or have not read.

I'm citing money managers such as David Swensen and Charles Ellis as examples of really-big-picture kinds of thinkers. Mr. Swensen says, "Don't invest like I do." Warren Buffet says the same. I'm familiar with the refrain, because I use it myself when friends or family ask me for investment ideas. (Of course, the only thing I have in common with these gentleman is the use of the line, "Don't invest like I do.")

I encourage people to do what all successful investors before us have done: find a reasonable, well-thought-out investment strategy that works for you, and stick with it.
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Old 03-18-2008, 07:06 PM   #18
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You are hereby pardoned.
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