"Lost Decade" 1999-2009

[MichealKnight]

I have posted here in the past as my Early Retirement seemed on the way - part my choice, part - my relatively successful business career sort of telling me to eat poop for the past few years....and I am now Early Retired. (I'm 45). I plan to write more later but for now...

I never ever believed in, nor "invested" in the stock market. I felt it was funny-money, and every 8-10 years, certain entities who control it come, take their money, and the masses shake their head, brag to each other about "I took a tax loss!" and "I dollar cost averaged!" - -it just never clicked with me - and most of my adult life I was making more money than I ever deserved quite frankly.

But now I look back - jeepers - had I invested ....I'd be way ahead right now so being early-Retired, I am about 45% in stocks.......long term template is probably between 50-60% depending on events and my mood Anyhow... as I keep penciling and planning .....I read about that "lost decade" of 1999-2009. Geez...I couldn't take 10 years of -2%.

I looked up year-by-year VWINX (Wellsley) performance for that time period.

I'm showing an annualized......+6.7% annualized return over that decade.

The flippant me feels like saying "if 6.7% is a lost decade, please---lose as many decades as you can sir"

(I need 4.8% annualized nominal to make it. If I get 5.75-6 then it's just sublime)

But the cautious me says it can't be that easy.

Still - -a fund that isn't "timid" but is hardly too aggressive did 6.7% in the lost decade.

I guess I'm asking opinions...... just how "lost" was that decade because to me....6.7% I'd kiss anyone's ring to get annually.

Thanks

 

[NW-Bound]

Wellesley did well during the "Lost Decade" because the fund avoided high P/E tech stocks, and its bond holdings helped a bunch.

The "Lost Decade" had its name because the S&P was like crap. Here's what $10K invested on Jan 2000 would become on Jan 2010 if invested in 1) Wellesley, 2) the Vanguard S&P Fund, and 3) Vanguard Total Bond VBMFX

1) Wellesley: $19,585
2) VFINX: $9,016
3) VBMFX: $18,003

If we take into account the cumulative inflation of the above 10-year period, which ran 28.37%, then you will cry your eyes out for the S&P holders. Here are the gains of the above 3 funds.

1) Wellesley: 1.546x (4.45%/annum)
2) VFINX: 0.702x (-3.48%/annum)
3) VBMFX: 1.402x (3.44%/annum)

How do you like to have 70c on the dollar after 10 years?

So, don't sneer at the non-aggressive Wellesley Fund. I don't have that much in this fund because I am an active investor, but the managers have my respect.

PS. If the S&P was so crappy, you don't want to know about the NASDAQ.

Well, I will tell you anyway. After 10 years, if invested in the NASDAQ 100 Fund QQQ, you would have 40c on the dollar after inflation. You would be bawling.

 

[Whisper66]

It didn't feel like a lost decade to me so got curious about why. The S&P 500 really didn't progress much so I should have felt the pain. The linked article explains it pretty well. The last graph shows what that decade looked like from a cost averaging investor view (I was still working then) vs from someone that just had a lump sum invested at the beginning. Glad I was working through that time! Revisiting the lost decade of U.S. stocks - Investing Par Excellence

 

[ImThinkin2019]

It didn't feel like a lost decade to me so got curious about why. The S&P 500 really didn't progress much so I should have felt the pain. The linked article explains it pretty well. The last graph shows what that decade looked like from a cost averaging investor view (I was still working then) vs from someone that just had a lump sum invested at the beginning. Glad I was working through that time! Revisiting the lost decade of U.S. stocks - Investing Par Excellence

I really liked this article. Thank you for posting it.

 

[DrRoy]

My average return that decade was 2.9%. Not stellar, but not lost.

 

[target2019]

I guess I'm asking opinions...... just how "lost" was that decade because to me....6.7% I'd kiss anyone's ring to get annually.

Thanks

I was fortunate and woke up sometime in that decade. So our retirement savings accelerated in both decades, 2000-2009 and 2010-2019.

The 3 significant lessons I came away with were:
1) It is always better to start earlier than later.
2) Starting or accelerating savings in a recession is awesome.
3) Our total pie is the reward.

 

[qwerty3656]

I think what is missing is you can't time the market. I was dollar cost averaging before during and after the "lost decade" and if I would have missed the down times, I would have missed the up times as well. I think the way to look at it is if you stay invested over a life time, the stock market is always going to win out.

 

[clobber]

I have a completely different take on the decade. For me it was "The Winning Years." Attached is a graph I created taken directly from my investing records.

Obviously the X axis is time, and I was investing $$ every month (dollar cost averaging).

The Y axis is more interesting. This is what I am calling the "Holding Period" total return. It is just what it sounds like: the total return on that money from the date I purchased it until December 2020 (I guess I need to update). You can see that what I bought in the year 2000 has returned around 350%. What I bought in 2010 is similar. But man, what I bought in 2002 and 2008 has returned 700-750%! My best total returns come from the "lost" decade.

 

[street]

I think what is missing is you can't time the market. I was dollar cost averaging before during and after the "lost decade" and if I would have missed the down times, I would have missed the up times as well. I think the way to look at it is if you stay invested over a life time, the stock market is always going to win out.

^ This is my thinking on the the "Lost Decade" also. I beleive my perpetual/consistent buying through that time, has made me a winner today. Stock market is for the long haul, a life time is the only way to really do well at it.

 

[Andre1969]

I don't know how to do the math for percentages, but here's some dollar numbers.
On 12/29/1999 my investible assets were at $39,882.
On 12/31/2009 the total was $460,646.

Of that gain, $94,905 was appreciation/profit. $361,753 was additional investments (Roth, 401k, proceeds from the sale of a condo, etc).

Even though it's considered to be a "lost" decade, it certainly wasn't a "flat" decade. There were tremendous highs, frightening lows, and a bit of everything in between. I have a feeling if you were somewhat diversified, and rebalanced at the right times, most people still would have been out ahead.

These start and end dates of whatever period are also somewhat arbitrary, and perhaps a bit meaningless when you really look at the big picture. For instance, if the 2000-2002 downturn had started just a year earlier, or the Great Recession got moved back about 18 months, we'd be a lot more nostalgic about the 2000-2009 period, and less so about the decades before or after.

Now, admittedly, 2010-2019 was better. Here's my dollar figures for that timeframe:

12/31/2009, investible assets total: $460,646.
12/31/2019, investible assets total: $1,956,045.

Appreciation/profit: $1,062,080
Additional investments: $433,809.

So far, the 2020's have been awesome. I added everything up this morning and it's sitting at $2,379,479. $431,300 of that is appreciation/profit. Additional investments is actually at negative $7,866, as I pulled out slightly more last year than I invested, and have done the same this year. So is it time to apply that W-word to the 2020's yet?

 

[audreyh1]

It wasn’t a lost decade for me because the last 3 months of 2009 had a lot of recovery, plus I had a pretty good bond allocation and I had rebalanced.

But it was close.

 

[jollystomper]

For the long run 2000-2009 was fortunate to me. 2000 is when I began maximizing 401K and IRA contributions. Also, my income really jumped in 2002 and stayed up for most of those years (of course, those were also the main "paying for kids college years was well ). My 401K barely doubled during those years, and my contributions equaled 70% of the gain. However, buying in relatively low (both my contributions and a generous match) has made a big difference in the long run.

My largest taxable fund is VFINX, which I opened in 1997 and would invest a portion of my bonuses in over the years. It meant i accumulated a lot of shares in that period that are greatly increased in value.

 

[NW-Bound]

It didn't feel like a lost decade to me so got curious about why. The S&P 500 really didn't progress much so I should have felt the pain. The linked article explains it pretty well. The last graph shows what that decade looked like from a cost averaging investor view (I was still working then) vs from someone that just had a lump sum invested at the beginning. Glad I was working through that time! Revisiting the lost decade of U.S. stocks - Investing Par Excellence

The above article is a bit disingenuous when showing the return being positive at the end of 2012, instead of 12/31/2009. He was not showing the "Lost Decade", but spilled over to almost 3 years of the next bull market.

The dividend reinvestment should of course been counted in the return. That is also in the return data that I showed in an earlier post. It helped, but not enough.

The OP was saying that if Wellesley had a decent return in that period, then it could not have been so bad. That discounted the difference between Wellesley's performance as a defensive MF and that of other funds. I tried to point this out to give the fund the credit that it deserved.

About that period being a good time to invest, sure, as most posters have testified to the effect. However, most of us are no longer in the accumulating phase now, and let's imagine if we have to go through this again while trying to live on our stash.

I myself did not do too badly. Although I was still working part-time doing contracting work, my income was intermittent, and I could not have saved that much during that time. I would have a surplus for a few months, then had to draw on it for living expenses the next months. If I had a net positive saving, it would still be small relative to what I had accumulated.

I did not keep good records of money inflow/outflow during that period, but had a daily log of my total investable assets since 1999. From that, I got this record of my portfolio.

Jan 2000 - 1.00x
Jan 2001 - 0.95x
Jan 2002 - 0.92x
Jan 2003 - 0.78x
Jan 2004 - 1.06x
Jan 2005 - 1.19x
Jan 2006 - 1.36x
Jan 2007 - 1.49x
Jan 2008 - 1.72x
Jan 2009 - 1.27x
Jan 2010 - 1.59x

I lost beaucoup money from 2000 to 2003, because I was still holding on to my tech stocks. In 2003, realizing my mistake, I divested of them and got into commodity producers to benefit from the housing boom. By 2005, I was feeling confident enough to buy my 2nd home. When the subprime bubble burst, that knocked me back quite a bit in 2009. This time, I got rid of all the past high-flyers.

Overall, as an active investor, I was doing quite OK, despite the poor performance in the 2000-2003 period.

 

[MichealKnight]

Thank you all

Really enjoying the replies. Funny I'm like two sides of a coin in business.

Since I was 24, I have had 3 different companies, decent sized.....had 17 great years then maybe 2 bad ones but over all did very well.

When it came to stock market I went thru phases where I was active , and when I was dormant. My biggest mistake was panicking during crashes/selloffs.....and selling and when I look back with 20/20 hindsight -- - holding during those episodes would've paid off greatly - -- ADDING during those down months would've been rewarded even better.

I am still putting finishing touches on my master plan.

BUT - I think for sure - I want 3 years -5 years cash on hand. Yeah, bad investment --- but I want to use that as my 'living money' and my cushion so when crashes happen - I don't panic sell.

 

[jollystomper]

BUT - I think for sure - I want 3 years -5 years cash on hand. Yeah, bad investment --- but I want to use that as my 'living money' and my cushion so when crashes happen - I don't panic sell.

I do this. I would not call it a "bad' investment. Yes, you could risk putting it in the market for higher returns. But having a cushion to tide you through the bad market times without panic selling is a good investment in calmness and sanity, and keeps what you do have in the market from being a bad investment .

 

[MRG]

My assets at Megacorp suffered during this time. We were given shares in a private fund that normally did very but was stagnant during this period. Coincidently Megacorp had gone public, we were gifted thousands of shares that didn't move. I'm pretty sure the private fund was holding a bunch too[emoji848]. I started investing on my own in 2005 and slowly learned what not to do.

 

[NW-Bound]

I do this. I would not call it a "bad' investment. Yes, you could risk putting it in the market for higher returns. But having a cushion to tide you through the bad market times without panic selling is a good investment in calmness and sanity, and keeps what you do have in the market from being a bad investment .

+1

During the great market debacle of 2008-2009, I had some money in I bonds which could last me a few years, if my contracting work dried up.

I did deploy a lot of cash at the market bottom, and brought my stock AA up to 80%.

But I told myself I would never throw the I bond money into the market. And I did not. I tried to be greedy, but not that greedy.

 

[Markola]

A pure domestic stock portfolio was up about 33% for those ten years starting 1999 as late as August 31, 2008, so not horrible, like what came next was. Those who owned some bonds as well did even better. Now, a decade later, all the carnage looks in hindsight like a it was a great buying opportunity. That’s investing. I was working and saving strongly so was fortunate to automatically buy the historic dip.

 

[Closet_Gamer]

Interesting thread.

Of course, the start-end dates are completely artificial. Years ending in "0" are no more or less valid that years ending in "3".

I think the general point is that if you're in accumulation mode a down decade is a great thing. By all means, give me a down 30 years and then pop it to the moon right before I retire! But once that happens, please oh please, keep asset prices high!

 

[CRLLS]

I tried reading that article previously posted. The author lost me at

" In a period longer than ten years – hence the term lost decade.?

I don't think a "lost decade" is 12+ years. (Mar '00 thru Jul '12) At least not when I went to grade school.

 

[CRLLS]

I tried reading that article previously posted. The author lost me at

" In a period longer than ten years – hence the term lost decade.?

I don't think a "decade" is 12+ years. (Mar '00 thru Jul '12) At least not when I went to grade school.

 

[ncbill]

Note that other sectors indices (mid-cap, small-cap) did just fine.

https://www.forbes.com/sites/advisor/2010/09/13/its-not-really-a-lost-decade/?sh=20d041307cf8

So if you had split your asset allocation between a broad-based index fund plus a broad-based bond fund you also did just fine.

 

[NW-Bound]

Interesting thread.

Of course, the start-end dates are completely artificial. Years ending in "0" are no more or less valid that years ending in "3".

I think the general point is that if you're in accumulation mode a down decade is a great thing. By all means, give me a down 30 years and then pop it to the moon right before I retire! But once that happens, please oh please, keep asset prices high!

Right. We do not need the endpoints to be on years ending at 0.

But take any rolling 10-year period, and if you are not in accumulation mode and have to sell stocks for living expenses, the fact that the market is the same at the two end points means that you have been selling low most of those 10 years.

And it means you exit the period with a lot less than you start out with. If you start out with a 4%WR, when your stash goes down 25%, your WR becomes 5.3%. It does not take many years of that to shrivel your stash significantly.

And that would not make anybody happy.

 

[Koolau]

I didn't do the figures, but that decade was actually pretty good to me. I was 30% stock (on average) so lost relatively little - and bought a fair amount through my 401(k) with the age-related supercharged buying - forget what that was called. That set me up nicely for the eventual turn-around as many have suggested - it all depended when you were w*rking and when you FIREd.

Thats also the time I discovered PMs. I'll not argue if you suggest buying a 1/10 gold Eagle then that's now worth 10 times its original delivered price wasn't "lucky." And, true enough, you could find stocks and even funds that have appreciated that much and more in 20 years. But, during the decade itself, PMs really made the difference in my port. It went from "middling" to "pretty good."

I absolutely do not recommend my methods of investing 'cause most folks have done a lot better than me since the "lost decade." BUT for that period, I'd put my port up against most. Oh, and I also discovered, pssst. Wellesley during that time! Thanks unclemick. But YMMV.

 

[NW-Bound]

^^^ Well, most (all?) of the posters from 2007-2008 who are still here today were obviously able to dodge the bullet, or even to prosper if they were still working and had money to buy, or at least not having to sell low to buy food. By hook or by crook, they did OK.

But let's not forget the uncounted posters who quietly slipped away. I often wonder that happens to them, or if they revisit this forum.