No, really, it was not the lost decade

[RonBoyd]

Here is an interesting take on the lost decade:
Video - CNBC.com

Good post. Thank you.

 

[audreyh1]

Another fund that I still own, Dodge and Cox Balanced, performed very well until 2007, when they stumbled badly. They held too much financials! Curiously, Bogle spoke well of Dodge and Cox, even after they fell from grace. I think it was because of Dodge and Cox management's unquestionable integrity, compared to other shenanigans pulled by other mutual fund managers. Still, they should have known that these stinkin' financials outsized profits due to sham mortgages could not go on forever.

Actually, it wasn't just the equities in DODBX that was hurt. The bond portion did just as poorly. I know, because I also own DODIX. It was creamed! Why? Because for the previous year DODIX had eschewed treasuries and other govt debt for corporate bonds. I had no idea DODIX had become so concentrated. Fortunately, DODIX recovered very well rest of 2009.

Audrey

 

[audreyh1]

Although I stayed about 100% in individual large/mid cap domestic equities, the last decade went well for me (allowing me to retire in 2006) mainly due to 3 'whole portfolio' decisions :

1) shifting very heavily into (undervalued IMHO) REITs in late 1998 (completely missing the 2000-2002 downturn)
2) shifting back into blue chips in 2005 (when REITs became fully valued and regular blue chips better values than REITs IMHO)
3) shifting the part of my investments from no-longer-blue-chip financials into other blue chips in early 2008 when I felt unable to analyze them anymore, softening the 2008 decline

Overall IRR for the decade : 17.8% / year
More important to me : average increase in dividend generating ability (my own standard) of almost 17% / year (my current portfolio is not as undervalued IMHO as my portfolio at the end of 1999 was).

Very impressive CyclingInvestor! If I were willing and able to do the company/segment analysis you do, I would time asset classes too!

Audrey

 

[Meadbh]

Although I stayed about 100% in individual large/mid cap domestic equities, the last decade went well for me (allowing me to retire in 2006) mainly due to 3 'whole portfolio' decisions :

1) shifting very heavily into (undervalued IMHO) REITs in late 1998 (completely missing the 2000-2002 downturn)
2) shifting back into blue chips in 2005 (when REITs became fully valued and regular blue chips better values than REITs IMHO)
3) shifting the part of my investments from no-longer-blue-chip financials into other blue chips in early 2008 when I felt unable to analyze them anymore, softening the 2008 decline

Overall IRR for the decade : 17.8% / year
More important to me : average increase in dividend generating ability (my own standard) of almost 17% / year (my current portfolio is not as undervalued IMHO as my portfolio at the end of 1999 was).

Good forecasting!
Just wondering if your name is related to your love of biking or your love of cyclical investing?

 

[RonBoyd]

WaPo jumps on the bandwagon:

Aughts were a lost decade for U.S. economy, workers

It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.

 

[CyclingInvestor]

Good forcasting!
Just wondering if your name is related to your love of biking or your love of cyclical investing?

Bicycling - touring, commuting (when I worked) and shorter rides.I have enjoyed it since my first paper route at 9 in 1967 and first overnighter (LA-Santa Barbara) in 1983.

If I were willing and able to do the company/segment analysis you do, I would time asset classes too!

Audrey

Thanks. I actually only look at individual companies (30-40 at any time, which are all I can find that clear the bar). The big shifts were done one company at a time over a period of months as relative values changed.

 

[Dawg52]

Fortunately for me, 1999-2007 was my best earning years and the majority of my net worth was equity in the company I worked for(private co and equity not affected as a public co). Too bad I didn't keep working until 12/31/09, adding even more to my net worth and missing most of the down turn as I would have still been invested primarily in my company stock, but that's the way it goes. Like most, 2007-2009 was not pretty but at least I did OK for the last 10 years as a whole. I have enjoyed not working the last 2 years though.

 

[RockyMtn]

A very interesting exercise. Fortunately I used MS Money the entire decade and just had to push a few buttons to come up with the numbers.

A few qualifiers...

1. I worked the entire decade, except the last six months of 2009, at increasingly higher salary, bonus, stock options, etc.

2. Half of the NW went to the ex in March of 2000 in a divorce.

3. I was more than 80% in equities the first six years of the decade.

The results...

IRR
1/00 to 12/02 -28% IRR
1/03 to 12/05 +12% IRR
1/06 to 12/09 +11% IRR
For the decade +5% IRR

Net Worth Increase
For the Decade +500%
From Divorce date (3/00) +850%
From low point (4/01) +1400%

The lessons to be learned.

1. Stay invested, time is your greatest ally.
2. If you make more save a higher % each year. Guess this is the classice LBYM argument.
3. Diversify and be faithfull to your AA.

All in all a great decade as far as I'm concerned.

 

[teejayevans]

A very interesting exercise. Fortunately I used MS Money the entire decade and just had to push a few buttons to come up with the numbers.

A few qualifiers...

1. I worked the entire decade, except the last six months of 2009, at increasingly higher salary, bonus, stock options, etc.

2. Half of the NW went to the ex in March of 2000 in a divorce.

3. I was more than 80% in equities the first six years of the decade.

The results...

IRR
1/00 to 12/02 -28% IRR
1/03 to 12/05 +12% IRR
1/06 to 12/09 +11% IRR
For the decade +5% IRR

Net Worth Increase
For the Decade +500%
From Divorce date (3/00) +850%
From low point (4/01) +1400%

The lessons to be learned.

1. Stay invested, time is your greatest ally.
2. If you make more save a higher % each year. Guess this is the classice LBYM argument.
3. Diversify and be faithfull to your AA.

All in all a great decade as far as I'm concerned.

You missed a lesson:
4. Don't get married
TJ

 

[RockyMtn]

You missed a lesson:
4. Don't get married
TJ

Yes I learned that one the hard way.

 

[freebird5825]

You missed a lesson:
4. Don't get married
TJ

or the corollary
4. Don't get married without a prenup.

 

[NW-Bound]

A decade is long time ...

A decade is getting shorter and shorter for me. It is not that long. Sigh...

 

[CyclingInvestor]

You missed a lesson:
4. Don't get married
TJ

Perhaps "Don't get married if you have significant $$$". I feel my relatively early marriage and divorce (before I had significant savings) served as a low cost inoculation against any later, much more expensive feelings that I could beat the odds or that "this one will last forever".

 

[clifp]

I think it was the lost decade for me. Unfortunately I only have my net worth calculation from Jan 2003, but I have been doing them at the beginning of the year for almost 20 years.

IIRC my net worth now is about 5% below what in Jan 2000. This isn't all do to stock or bond investments. Between the house, a business venture, and some Angel investments which are unlikely be worth much I've lost more than $200,000. If I hadn't done those things I'd be up a bit. Despite living in a Hawaii for 10 years and not working.

In fact, I feel a bit more confident about not having to get a job. If I managed to get through this decade with only minor loses to my portfolio. I should be ok in a better environment.

 

[Alan]

Interesting exercise. I maintained my AA and had no major changes like inheritances etc. My IRR over the last decade was 2.75%/year and net worth increased 725%. It was the decade of largest income for me plus we put 2 kids through college and saw them get jobs plus DW ESR'ed 5 years ago.

Looks like I would have been much better off if I'd been in Wellesley and Wellington but not possible as limited to 401(k) options.

Overall though, quite a pleasing result and so fortunate not to have ER'ed 2 years ago.

 

[FUEGO]

I guess I'm in a situation unique to most other posters here of having "come of age" during this "lost decade".

I have tracked investment returns and net worth changes quarterly for exactly 5 years as of January 1, 2010. The beginning of my tracking also corresponds closely to when I finished college and got a "real" full time permanent job (roughly 5 years ago).

The numbers are in, and I had an internal rate of return of roughly 3.8% per year in the portfolio. However continued inflows made the total value of the portfolio increase by a factor of roughly 1000% over the five year period. Net worth is also up by a similar magnitude. Partly that is due to starting off with a modest mid-five figure net worth and portfolio size. But it is also due to strength in income and growth of income over the years which allowed increasing savings and contributions each year.

So while I only saw a 3.8% internal rate of return over the last 5 years, my portfolio value and net worth grew by roughly 60% a year (on average). For my financial well-being, this was most certainly NOT a "lost decade".