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laurence · 06-09-2008, 09:38 AM

O.K., I know it's had it's ups and downs, but the S&P is trading in a range about where it was June of '99. I think best case the dividends are cancelled out by inflation, does this mean in real terms it's had 0% return for the last 9 years, or am I missing something? How does this compare to the bad times in the 60's and 70's? How are those of you who are retired doing, how's the portfolio balance? NASDAQ looks flat for that time period, too, although Russell 2000 is up a decent amount.

JustCurious · 06-09-2008, 09:48 AM

Vanguard's S&P500 index fund has a 10 year average annual return of 4.13% as of 5/31/08. The total stock market index fund has a 10 year average annual return of 4.79%. And someone who continued to make regular investments through the 2000-2002 bear market would have even higher returns than that.

Also, Vanguard's Global Equity Fund (including U.S., international and emerging markets) has a 10 year average annual return of 11.15%. So a well diversified stock investor who continued to make regular contributions over the last 10 years would have done very well.

laurence · 06-09-2008, 10:00 AM

My portfolio has done better than flat, not only due to diversification but also ongoing contributions as I took advantage of the lows. But I was just curious about those in the withdrawal phase. A 4.13% return isn't much if that doesn't factor in inflation. With a 4% withdrawal rate, you are down over ten years. Also, ten years is June '98, 98 to 99 was an excellent year, I'll be curious to see what the 10 year return looks like next year. I was just thinking this is definitely times that try an ER's soul.

JustCurious · 06-09-2008, 10:05 AM

Those in the withdrawal phase should have a majority of their investments in fixed income, not stocks. For example, Vanguard's Lifestrategy Income fund has a 10 year average return of 5.64%.

W2R · 06-09-2008, 10:13 AM

Quote:

Originally Posted by laurencewill

My portfolio has done better than flat, not only due to diversification but also ongoing contributions as I took advantage of the lows. But I was just curious about those in the withdrawal phase. A 4.13% return isn't much if that doesn't factor in inflation. With a 4% withdrawal rate, you are down over ten years.

You're right. To illustrate that, here are the CPI-U percentages since 1998 which I happened to have right in front of me:

1998 1.60%
1999 2.20%
2000 3.40%
2001 2.80%
2002 1.60%
2003 2.30%
2004 2.70%
2005 3.40%
2006 3.20%
2007 2.80%

They really don't leave much room for withdrawal. Like JustCurious said, this is why we have bonds (and hope).

Quote:

Originally Posted by laurencewill

Also, ten years is June '98, 98 to 99 was an excellent year, I'll be curious to see what the 10 year return looks like next year. I was just thinking this is definitely times that try an ER's soul.

That's for sure.

Leonidas · 06-09-2008, 10:15 AM

Uncle Warren is betting on the S&P.

He's got a $1M bet against Protege Partners that

Quote:

“Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.”

d · 06-09-2008, 10:22 AM

10 year returns will (hopefully) look better when measured from the post-peak lows, rather than from the heady highs of the "bubble".

haha · 06-09-2008, 11:23 AM

Quote:

Originally Posted by laurencewill

O.K., I know it's had it's ups and downs, but the S&P is trading in a range about where it was June of '99. I think best case the dividends are cancelled out by inflation, does this mean in real terms it's had 0% return for the last 9 years, or am I missing something? How does this compare to the bad times in the 60's and 70's? How are those of you who are retired doing, how's the portfolio balance? NASDAQ looks flat for that time period, too, although Russell 2000 is up a decent amount.

The standard explanation that I have read is-"Well, sure, but I didn't have S&P. I had small cap, foreign, colloidal silver, etc."

So really, Laurence, it's all good.

Ha

laurence · 06-09-2008, 12:40 PM

Right, sometimes there seems to be a data gap between the self proclaimed Vanguard Die-Hard 4 pillars fans and the later claimed portfolio position. I guess I'm the only one in S&P index funds.

brewer12345 · 06-09-2008, 12:48 PM

Not to put too fine a point on it, L-Man, but our intrepid, diversified retiree is also 10 years closer to the big SWR in the sky (insert Flying Spaghetti Monster comment here). So the diversified portfolio retiree is roughly where they started or perhaps a bit behind after inflation, but they also have 10 fewer years of withdrawals to make it through.

See, there is always a silver lining!

W2R · 06-09-2008, 01:10 PM

Quote:

Originally Posted by brewer12345

Not to put too fine a point on it, L-Man, but our intrepid, diversified retiree is also 10 years closer to the big SWR in the sky (insert Flying Spaghetti Monster comment here). So the diversified portfolio retiree is roughly where they started or perhaps a bit behind after inflation, but they also have 10 fewer years of withdrawals to make it through.

See, there is always a silver lining!

Gosh, aren't YOU just full of cheer today.

Independent · 06-09-2008, 01:37 PM

Since ATS5G was kind enough to give us the link to this site: Political Calculations: The S&P 500 at Your Fingertips

it's easy to get the answer.

The real, total return from 4-99 thru 4-08 was a positive 0.99%.
However, if you look at the 8 years from 4-00 thru 4-08, you get a negative 2.03%.

I didn't look for the crossover point.

Notmuchlonger · 06-09-2008, 01:52 PM

Why worry about running out of money. Really you are allowed to end it whenever you want..Unless death beats you to the punch.

brewer12345 · 06-09-2008, 01:59 PM

Quote:

Originally Posted by Want2retire

Gosh, aren't YOU just full of cheer today.

I thought I was just being pragmatic. Was also finding a polite way of saying "don't worry, you'll be dead soon."

Notmuchlonger · 06-09-2008, 02:23 PM

Quote:

Originally Posted by brewer12345

I thought I was just being pragmatic. Was also finding a polite way of saying "don't worry, you'll be dead soon."

Oh wait what I missed that

cute fuzzy bunny · 06-09-2008, 02:32 PM

Fun with data mining!!

If you start back in 1993 or start in 2003, you get around an 8% annual rate of return, inflation adjusted.

So if you're planning on being retired, make sure you dont look at your portfolio between years 8 and 10.

laurence · 06-09-2008, 03:07 PM

Brew, I absolutely get your point, and that's true, most of us are talking about a portfolio surviving 30-40 years, that's not a bad "worst case" for the first 10.

Hey CFB! I'm not trying to data mine! I just remember the conversations about FIRECalc and when were the worst times to retire, and how the late 60's was horrible where the stock market was flat for 12 years, and just thinking "hey, we are getting close!".

And BTW I'm only up ~15% on that VTV tip you gave me so I'm not sure I'm talking to you anymore anyway!

brewer12345 · 06-09-2008, 03:16 PM

Quote:

Originally Posted by laurencewill

I just remember the conversations about FIRECalc and when were the worst times to retire, and how the late 60's was horrible where the stock market was flat for 12 years, and just thinking "hey, we are getting close!".

At least thus far, we haven't seen anything like the horrific bout of inflation that whacked the 1966 retiree. That on top of the flat nominal performance was the killer.