Is it me, or are these S&P 500 stock market returns depressing?

[NW-Bound]

I believe that the market did not recover from the 1929 low until 1954.

Price wise, that may be true. Total return wise, it is not.

The dividend yield used to be a lot higher than it is now. There were many years when it was 8% or higher. If I could find the chart showing the historical total return, I will share it (I saw it in one of my books on investing).

PS. The S&P index was created in 1957. Prior to that, there were only the Dow Jones Industrial Average (the common DJ Index), the Dow Jones Transport Average, etc...

 

[skipro3]

A couple comments;
First, someone stated they didn't know anyone who solely invested in the S&P500 Index. What's a guys SUPPOSED to invest in and more importantly HOW is a guy supposed to know what to invest in? Remember, these are pre-early retirement guys. Guys who are working their butts off to make enough money to sock away so they can retire early. There's usually a family and a home to take up what ever time they aren't working. There's not much time to spend tracking funds, bonds, high caps, growths, etc. So, why wouldn't the common worker consider putting his savings into an index fund? I've tried both ways and I'm no more better off guessing what funds to invest in than the S&P500 index and it's the rare exception it seems to find someone on here that does consistently better either.

Second; Someone said 7 years isn't a long term. It sure is long term if you are trying to retire early. If you started to work and save at 21 and wanted to retire around 42 (that's early retirement, right?) then 7 years is one third of your investing time before you need to really get conservative and count on this nest egg as income. Even if you planned to work another 7 years; to 47, or even seven years after that; to 54, then 7 years is still a long time; 20 or 25% of the investment growth stage of your savings.

My advice to investment is this; Take on no debt of any kind, pay off your home before you think you'll be able to retire, consider real estate rental for part of your retirement income, save enough money and plan that the most you are going to be able to do is slow down the ravages of inflation. You need to save faster and with more money than inflation will eat away at the savings because the growth in the market isn't going to keep up with inflation AND grow your savings at the same time. Not in the long run, whether that's 7 years or 7 times 7 years. The risk is too great and will catch up sooner or later. The only possible exception is the guy who somehow has figured out the investment world well enough he could probably make his living at advising. That isn't the normal guy who's saving, working and raising a family. It takes too much time each day to understand the market.

 

[MichaelB]

A couple comments;
First, someone stated they didn't know anyone who solely invested in the S&P500 Index. What's a guys SUPPOSED to invest in and more importantly HOW is a guy supposed to know what to invest in? Remember, these are pre-early retirement guys. Guys who are working their butts off to make enough money to sock away so they can retire early. There's usually a family and a home to take up what ever time they aren't working. There's not much time to spend tracking funds, bonds, high caps, growths, etc. So, why wouldn't the common worker consider putting his savings into an index fund? I've tried both ways and I'm no more better off guessing what funds to invest in than the S&P500 index and it's the rare exception it seems to find someone on here that does consistently better either.

Second; Someone said 7 years isn't a long term. It sure is long term if you are trying to retire early. If you started to work and save at 21 and wanted to retire around 42 (that's early retirement, right?) then 7 years is one third of your investing time before you need to really get conservative and count on this nest egg as income. Even if you planned to work another 7 years; to 47, or even seven years after that; to 54, then 7 years is still a long time; 20 or 25% of the investment growth stage of your savings.

My advice to investment is this; Take on no debt of any kind, pay off your home before you think you'll be able to retire, consider real estate rental for part of your retirement income, save enough money and plan that the most you are going to be able to do is slow down the ravages of inflation. You need to save faster and with more money than inflation will eat away at the savings because the growth in the market isn't going to keep up with inflation AND grow your savings at the same time. Not in the long run, whether that's 7 years or 7 times 7 years. The risk is too great and will catch up sooner or later. The only possible exception is the guy who somehow has figured out the investment world well enough he could probably make his living at advising. That isn't the normal guy who's saving, working and raising a family. It takes too much time each day to understand the market.

Skipro3, when someone (Nords) said the S&P wasn't the only thing to invest in, he had a point, as I made. Emerging markets, US small cap, and Int'l small cap all did well while the S&P languished. You don't need to be an expert, just diversify your portfolio and rebalance. When someone else (Nords again) said 7 years wasn't a long time, he was making an important point, which is if you are investing for ER, your sights shouldn't only be set on the ER date, because you're still going to live to a ripe old age, your portfolio needs to provide all that time, and there may be more than one 7 year stretch of lousy stock returns.

Your recommendation of commercial real estate is good and would add to a well diversified tax deferred portfolio.

 

[NW-Bound]

I am not a Boglehead, and I do not frequent their forum. Still, I do not believe Mr. Bogle said one should put all in the S&P index. I believe he said that you could do a lot worse putting all of your stock portion into an active fund. So, what else can you invest in, meaning the other portions? Bond is one. It's up to one to find out about the other possibilities.

It is true that a working guy raising a family and working to make a living has little spare time to study investing. I was one. It was only when I was in my mid 40s, one day facing a life crisis when the start-ups I had been involved with went belly up, that I realized that I'd better be spending more time managing my own money, because no one cares about it as much as I do.

However, a person with a 7-figure portfolio would be more willing to spend the time on financial matters than someone with a 6-figure account. So, how does one get there in the first place? For me, it took time (20 years of working and saving), "a strong set of 'deferred gratification' clamps" (as discussed in another concurrent thread), a working spouse who was willing to wear her own set of clamps, and finally, some luck.

And then, even now it is not smooth sailing for people who seem to have made it. Newcomers here might have missed the threads back in the late 2008-early 2009 when ER'ees were sweating bullets, and discussing how they were soiling their... Umm, you got what I meant.

In case you want to look at the other side of passive investing, I recommend The Battle for Investment Survival by Gerald Loeb (long deceased, and a founder of the old E.F. Hutton investment firm). His strategy calls for staying very safe with your stash, and buying stocks only when you are fairly sure of making money. I guess the time when blood was flowing in the streets like the recent Great Recession would apply. Taleb, the author of the Black Swan book, has a similar strategy.

I do not follow his strategy, which is actually very conservative. Loeb said that it would require a certain flair that only comes with practice. That, I have to agree.

 

[samclem]

If your investment manager is not matching the SP 500 index or a total stock market fund..... FIRE THEM!

And hire another one who will take your money and promise to do better. He'll rearrange your investments (anticipate more fees and tax consequences). Pay him until he fails, too. Keep this up until the light comes on:
1) Half of the advisors do worse than average, and there's no knowing which ones that will be.
2) Getting the "average" of a well diversified basket of assets, and paying no advisor fees, using low-expense investments, and reducing the tax consequences from frequent trading, is a pretty d*mn good result compared to what 80%+ of investors achieve with professional "help".

 

[Ed_The_Gypsy]

If your investment manager is not matching the SP 500 index or a total stock market fund..... FIRE THEM!

IMHO, still a waste of time and money.

Consider simple, self-directed options:
a. Wellesley
b. A Couch Potato Portfolio. Search in this forum for Scott Burns. Rebalance once a year.

Either one will produce gratifying results over 7 years compared to one asset class (the S&P 500).

In the mean time, educate one's self. And pay no attention to those who want to sell you something.

 

[lrak]

It's not the first time we've seen flat returns for extended periods of time and likely won't be the last. Using the linked calculator, the ten-year period from January 1, 1972 to December 31, 1981 showed an average return of 0.00 % and annualized return of -2.04 %. It wasn't always better in the "good old days".

But you could get bank CDs for 6-16% over that time... The stock market is doing better than CDs.