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

[nico08]

I just checked to see the compound annual growth rate of the S&P 500 for the period that I have been actively investing in, in an effort to retire early. I used the calculator at this site: CAGR of the Stock Market: Annualized Returns of the S&P 500

I used the start date as January 1, 2005 and the end date as December 31, 2011. I had been saving and investing some before January 1, 2005, but it was more erratic and I was focusing more on paying off student loan debt.

Well, the average return was 1.93%, the Compound Annual Growth Rate (Annualized Return) resulted in a .02% return, when adjusted for inflation.

Is it me, or are these returns depressing. And do they make you question savings and investment and LBYM discipline that you have been following for this long?

I know we invest for the long term, but this has been a seven year period, that seems pretty long to me and I would like to have seen a greater return.

 

[Gumby]

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".

 

[FIREd]

Is it me, or are these returns depressing. And do they make you question savings and investment and LBYM discipline that you have been following for this long?

Would I be better off today if I had not saved/invested and if I had lived above my means? The answer is no. Even at the depth of the financial crisis, I didn't question saving/LBYM for a second.

 

[Ed_The_Gypsy]

I just did the same calc on VFINX from the Yahoo Financial historical data. I may have entered something twice, but I came up with $6.9 increase in NAV over that period and $14.78 in dividends from a starting point on 3 Jan 2005 of $108.90 for a total of +2.63%. Not very exciting.

I have not been using the S&P 500 for a long time as I, too, was disappointed in the S&P 500, after which, Gummy converted me to slice-and-dice, focusing on small cap, value, international and later, dividend producers. I have also formed an aversion to 'growth' companies.

However, things do run in cycles. The word is that companies have been hoarding cash and are waiting to use it. The bigger the company, the more cash. It has not been distributed as dividends to shareholders--yet. It may be about time for them to use it productively.

Perhaps a student of these things can tell us if this makes sense. Is the S&P a sleeping giant?

 

[Animorph]

Past performance. Just setting up for a nice bull market, one of these decades...

 

[jerome len]

The real answer is to diversify! That was the advice given on CNBC by one of their guests last week.

their advice was to buy some mid cap, small cap, REITS, bonds, emerging markets, etc.........these are just some that I own. If you did the chances are you did far better than just S&P or total stock funds.

No one knows the future.......but you can bet that we'll be surprised so owning different buckets of stocks, bonds and commodities usually will be best for most of us.

I'm not in the financial buisness nor should you consider this advice.......but I have done far better than the S&P with a portfolio that all my friends said was too conservative years ago. I'm lucky, diversification has worked for me.

 

[Major Tom]

Is it me, or are these returns depressing. And do they make you question savings and investment and LBYM discipline that you have been following for this long?

I know we invest for the long term, but this has been a seven year period, that seems pretty long to me and I would like to have seen a greater return.

You're not planning on having your entire investment portfolio invested in equity funds are you?

My rather general understanding of these matters is that when equities go down, bonds tend to go up, so holding a portion of your portfolio in bonds or bond funds would probably give you a slightly higher return during these "low" periods - as well as reducing the volatility of your portfolio enough so that you can stomach the lean times.

There are other asset classes too. Quite a few forum members own rental real estate.

 

[haha]

It has not been distributed as dividends to shareholders--yet. It may be about time for them to use it productively.

This unfortunately depends on how to find productive, that is profitable, uses for this cash. If it were obvious, it would already have happened.

Ha

 

[audreyh1]

I think one reason companies hoard so much cash these days is because it protects them from the sudden type of credit crisis we saw in 2008. But maybe they will start returning a bit more to shareholders.

 

[Nords]

I just checked to see the compound annual growth rate of the S&P 500 for the period that I have been actively investing in, in an effort to retire early.
Is it me, or are these returns depressing. And do they make you question savings and investment and LBYM discipline that you have been following for this long?
I know we invest for the long term, but this has been a seven year period, that seems pretty long to me and I would like to have seen a greater return.

I guess it's an interesting academic exercise, but seven years is not very long and I don't know anyone who invests solely in the S&P500.

When I was getting started in 1979, stocks were dead and the smart investors were in gold bullion or gem diamonds. I'm glad I didn't follow that advice.

 

[BigMoneyJim]

Looking at my own funds, my overall balance is relatively flat, but I have more shares. Assuming NAV returns to previous highs my overall balance will be higher.

I think I just said that I may be losing value, but I'll make it up in volume.

 

[MichaelB]

Stock markets in Brazil, China and India have all risen substantially since 01/05. Just because the S&P has not grown does not mean there have not been good investment opportunities.

 

[Ed_The_Gypsy]

You're not planning on having your entire investment portfolio invested in equity funds are you?

I am. I do. I are.

 

[Ed_The_Gypsy]

Quote:
Originally Posted by Ed_The_Gypsy
It has not been distributed as dividends to shareholders--yet. It may be about time for them to use it productively.


This unfortunately depends on how to find productive, that is profitable, uses for this cash. If it were obvious, it would already have happened.

Ha

Aw, you trying to pop my balloon?

At some point that money has to go somewhere. They can't eat it. Either spend it or distribute it.

I dunno. Maybe they CAN eat it?

 

[Lsbcal]

...(snip)...
Is it me, or are these returns depressing. And do they make you question savings and investment and LBYM discipline that you have been following for this long?

I know we invest for the long term, but this has been a seven year period, that seems pretty long to me and I would like to have seen a greater return.

Replies above are good ones.

Sometimes the best investment returns occur when expectations are low. They were sky high in the year 2000 and look how that turned out.

Get a good investment and spending plan. Then keep to it.

 

[NYEXPAT]

This unfortunately depends on how to find productive, that is profitable, uses for this cash. If it were obvious, it would already have happened.

Ha

That's because "the cash" is being used in "repo deals" to finance the European Banks who refuse to lend to each other!

 

[KiraC]

I'm learning that these "sideways" markets take active management to make a profit. Timing a market though is tough.

 

[Tadpole]

If this is just a depression question - Is it depressing that money I invested in 2000 is now worth about .89 cents for every dollar (computed from Jan 1 2001)? Well, yea, that's depressing. I would rather not have computed that datum.

 

[Finance Dave]

It's not you, they are not good.

 

[samclem]

I'm learning that these "sideways" markets take active management to make a profit. Timing a market though is tough.

For every active manager believing he's making a smart "buy" there's an active manger who believes he's making a smart "sell."

In a sideways market, when returns are low, people become more fully aware of the costs they pay for active management. And that's when they discover how some people--the folks they pay for their advice--can advertise that they "can make money in the market no matter which way it goes." So true! That 1-2% on assets managed rolls in like clockwork.

 

[NYEXPAT]

So true! That 1-2% on assets managed rolls in like clockwork.

+1

 

[wolfbay]

I believe that the market did not recover from the 1929 low until 1954. The Japanese market is no where near returning to it's 1989 high. Things could be a lot worse.

 

[Bikerdude]

Evidence that the balanced approach is worth considering.

Why are bonds outdoing stocks over long term?

 

[Onward]

I'm learning that these "sideways" markets take active management to make a profit.

Well, that's certainly what active managers want you to think.

 

[Chuckanut]

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