No, really, it was not the lost decade

[Martha]

Provided that you either didn't spend any money or you added to your portfolio.

Your Money - For Steady Savers, It Was Hardly a Lost Decade - NYTimes.com

But if you’re not yet retired, you were probably adding money to your portfolio throughout the decade. Let’s say you started with the same $100,000 and the identical 25/25/50 asset allocation from the previous scenario. Now, imagine that you added $1,000 a month and then rebalanced your account annually so that you began each new year with that original allocation.
The result? You ended up with $313,747, or $260,102 in January 2000 dollars. Hardly a lost decade at all

 

[NW-Bound]

I just looked. Compared to Dec 31, 1999, my portfolio is 59% higher.

Yes, I did add to it in the past 10 years, but also drew from it to buy a 2nd home. I never paid attention to cash flow, as long as it was positive. Isn't the definition of LBYM that your savings rate is simply positive?

I believe we still had a net savings though, but couldn't really tell how much. It certainly made an impact, though not as much as you would think, considering that I have been working part-time, and my portfolio was 7-figure back in 1999 already. One of these days, I may sit down to figure it out. But then, it is most likely I won't. So many other fun things to do.

I did lose >35% from the millenium New Year to Oct 2002. I would be lying if I say it was not scary. However, a redeployment from tech stocks to commodities (sell silicon chips to buy potato chips, as I often say) helped.

Cheers.


PS. One of my peculiarities is that I keep a DAILY record of my current portfolio, but do not of the inflow or the outflow.

 

[Gumby]

What was the IRR of such a course of action?

 

[NW-Bound]

What was the IRR of such a course of action?

I do not know!

And frankly, as long as my stash kept growing, despite our erratic spending, and also erratic income I should add, I just did not care. Only in the last 1-1/2 years where my own income became a trickle and DW already ER'ed that I was a bit alarmed. Then, I discovered this forum and found people generally are a lot more disciplined than we are. I just stumbled through life and tried to have fun along the way. If I had to be more regimented, I would have to rate myself even lower than 3 on the happiness scale.

 

[Gumby]

Sorry. I was referring to Martha's example. I could just figure it out but I'm too lazy.

 

[Meadbh]

Unlike NW-B, I calculate my NW only once a year, on March 31. I started in 2000 and didn't even bother in 2001. I just looked back at 2000, and my conservative estimate is that on March 31, 2010, my NW will have multiplied by 5 times since March 31, 2000. Granted, I had an inheritance this decade (the only one I will ever receive). I also earn a decent salary. But I live in the same paid off house and drive the same paid off car that I had in 2000.

 

[NW-Bound]

...my conservative estimate is that on March 31, 2010, my NW will have multiplied by 5 times since March 31, 2000.

March 2010 What stock market return are you assuming until then, my lady? I don't recall seeing your post in the "crystal ball gazing" thread.

 

[Gumby]

Sorry. I was referring to Martha's example. I could just figure it out but I'm too lazy.

Alright, I've shamed myself into doing the math. If I have calculated correctly, the gross IRR was about 4.7%. Net of inflation it was about 2.2%. Taxes would lower the return even further.

 

[Martha]

Alright, I've shamed myself into doing the math. If I have calculated correctly, the gross IRR was about 4.7%. Net of inflation it was about 2.2%. Taxes would lower the return even further.

Thanks. I was too lazy to figure it out and you gave in first!

 

[Meadbh]

March 2010 What stock market return are you assuming until then, my lady? I don't recall seeing your post in the "crystal ball gazing" thread.

Zero.

 

[samclem]

Our portfolio is up 59% from where it was in Jan 2000. I don't have precise figures, but my best guess is that approx 30% of the difference is from contributions made over the last 10 years and 30% is from growth of the original pile.

That's a pretty meager IRR, especially since I didn't adjust for inflation. Still, it's good when the numbers get bigger over time . . .

 

[audreyh1]

It wasn't a lost decade for me at all. I retired in 1999, and earned no income since then. My net worth today is 33% higher than when I retired. And I financed over 10 years of retirement plus bought a motorhome.

I was invested in other things besides the S&P500 - international, small cap, value, REITs as well as bonds. Was never heavy in growth stocks. Being more diversified than the S&P500 made a huge difference during the past decade.

Audrey

 

[scrabbler1]

My portfolio grew by 180% since the end of 1999. A good part of it was the growth in my company's ESOP (stock) which grew by a factor of 15. That includes additional shares I earned as well as the growth of the existing and new shares. I am now living off that money after I cashed it out as part of my retirement last year.

This was a good decade for me.

 

[unclemick]

I just finished a rather long(for me ) post over at the Boglehead's.

To paraphrase - I stayed retired - DID NOT WORK!! - even sinned a little Boglehead wise with a few dividend stocks. All praise to Mr B and balanced index principles. I read his first book (1994).

Whoopee!

heh heh heh - Now I would like the God's that be to dial up a better decade cause I'm not getting any younger and I want to party hardy - er before the Rest Home. .

 

[kumquat]

Our NW worth is up about 500% mostly due to increases in my former mega-corp's share price. We got and accepted an offer on our condo in Ed_the_Gypsy's town yesterday for exactly twice what we paid for it in 1999.

We realize we were lucky but, for us, this was the "decade of the golden goose". The next three decades...

 

[FIREd]

Things looked pretty bleak in early 2009, but our portfolio managed to finish the decade pretty strong with an international rate of return averaging 8.65% per year since 2000. We have seen tremendous growth in our net worth as well, having gone from almost nothing to just below 7 figure in the span of 10 years. I hope the next decade will be even better!

 

[ziggy29]

Things looked pretty bleak in early 2009, but our portfolio managed to finish the decade pretty strong with an international rate of return averaging 8.65% per year since 2000.

I was surprised to see ours was almost that good given the nearly 40% whack job we took in late '08 to early '09. Mostly that was because we ridiculously outperformed the market with healthy concentrations of small caps, gold stocks and REITs in the 2000-2002 bear market. As an example, in 2001-02 combined we were -7.6% *total* compared to about -29% for the S&P 500 with dividends reinvested. (In '02 specifically, we were -5.4% compared to -22% for the S&P despite being about 70% in stocks.)

Over the next few years we sold our excesses of these asset classes which were overvalued and bought more large caps, international and bonds which didn't get hit as hard since 2007. But it was mostly the headstart we got in the first three years of the decade which made the "awful oughts" almost tolerable from an investment perspective. I think it was the success of diversification and AA in the 2000-02 bear market which made the 2007-09 bear harder to take, because diversification really didn't save your butt like it did early in the decade.

 

[NW-Bound]

... I think it was the success of diversification and AA in the 2000-02 bear market which made the 2007-09 bear harder to take, because diversification really didn't save your butt like it did early in the decade.

I think your experience is common to the posters here, though I did not share it. In the late 90s through 2002, I was heavy in tech stocks (but no stinkin' dot coms). From Dec 31, 1999 to March 26, 2000 I was up 18%, despite being only about 70% in equities. I was so in love with my tech stocks that it took me a while to realize that they would not recover to their high. Indeed, many went bankrupt.

From that high in March 26, 2000 to Oct 9, 2002, I lost 44%.

Anyway, being through a scary period like that, due to my own fault of course, the recent market rout did not scare me as much. I "lost" only 37% from Oct 31, 2007 to March 03, 2009.

The difference this time is that there is no place to hide. In 2000, I was not hiding but clutching a lightning rod! As Ziggy mentioned, everything went down the chute this time. But having been hurt before helps numb the pain.

 

[Gone4Good]

It wasn't a lost decade for me at all. I retired in 1999, and earned no income since then. My net worth today is 33% higher than when I retired. And I financed over 10 years of retirement plus bought a motorhome.

I was invested in other things besides the S&P500 - international, small cap, value, REITs as well as bonds. Was never heavy in growth stocks. Being more diversified than the S&P500 made a huge difference during the past decade.

Audrey

If I recall correctly you also had the [-]good fortune[/-] brilliant timing of being mostly out of equities during the big 2000 sell off and averaged in after the bubble had burst. That must have helped a lot relative to what would have happened if you were fully invested through that whole time. No?

 

[traineeinvestor]

There was nothing lost about the last decade from a financial perspective - a combination of rising income + high savings rate and investing in (mostly) a combination of Hong Kong real estate (after a six year 60% fall) and emerging market equities (which boomed) combined for a significant increase in NW. A couple of [-]very lucky [/-]good market timing calls and some lump sum payouts from my previous job early in 2009 gave the portfolio a bit of a turbo boost last year.

On track to hit my retirement number at the end of 2011.

I wish all decades were as kind to my finances as the last one.

 

[audreyh1]

If I recall correctly you also had the [-]good fortune[/-] brilliant timing of being mostly out of equities during the big 2000 sell off and averaged in after the bubble had burst. That must have helped a lot relative to what would have happened if you were fully invested through that whole time. No?

I averaged in 1999-2002 so I was adding to equities during that entire time, not mostly out of equities until 2002. I was probably already 75% finished with my averaging in by the beginning of 2002.

And that was specifically for my retirement portfolio. I still owned quite a chunk of company stock early in the 2000s (i.e. equities).

It definitely helped that many of the asset classes I was buying into during that period did not suffer like the S&P500 did during that time, and many of these handily outperformed the S&P500 in subsequent years.

Nevertheless, the early easier ride through the 2000-2002 bear market didn't save me from being clobbered in 2009. I was killed last year like everyone else - at the end of Feb 2009 total net worth down 40% from peak in Oct of 2007 and about 6.5% below where I started in August of 1999!!!!! I am still down about 14% from peak. But since I am also up 33% from my retirement date, I am a happy retired camper!

Basically, I think that "lost decade" story is pretty specific to the S&P500 - i.e. large-cap growth stocks.

Audrey

 

[NW-Bound]

For what it's worth, here are the 10-yr annualized returns of the 3 most often mentioned Vanguard MFs. I do not own any of these, but am seriously thinking about putting a big percentage into Wellesley. I admit Uncle Mick's not-so-subliminal message is getting to me. Heh heh heh... (what did I just write?)

Vanguard Wellesley Admiral: 6.93% /yr
Vanguard Wellington Admiral: 6.30%/yr
Vanguard SP500 Index: -0.65%/yr

I have not looked but would guess Vanguard SP Index would outperform during the decade of 1990 to 2000, when the market kept going up and up.

Did my own performance beat Wellesley? I do not have exact figures, but I believe I outperformed it if counting from my lowest point in Oct 2002. If I include the earlier period of my insanity from 1999 to 2002, I would trail Wellesley badly. Looking ahead, who knows?

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.

 

[teejayevans]

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

 

[SecondCor521]

A decade is long time to track stuff .

From 12/1999 to 12/2009, a period which included 8 months of unemployment, two additional kids, buying a new car, a divorce, an MBA, several moves, saving a bunch in 401k's and IRA's and ESA's, and probably some other stuff, my net worth has grown at a CAGR of 8.71%.

2Cor521

 

[CyclingInvestor]

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).