Question For Mutual Fund Investors That Were In This Game Since 1980

[Blue Collar Guy]

For the forum members that were investing in mutual funds since 1980, I read the market averaged 16% plus for 18 years. Thats a long run. Did you stay the course? Did you re-balance? Did you cash out? Change your AA? If you remember, did you find the yearly returns unbelievable?
This question arose when I was in another thread doing the YTD change. Its over 10 %, but the dollar amount is staggering. Imagine 18 years at 16%?

 

[ChiliPepr]

This question arose when I was in another thread doing the YTD change. Its over 10 %, but the dollar amount is staggering. Imagine 18 years at 16%?

But, that was also the time you were spending 18% on you mortgage!

 

[dan9]

Yes but a series of bad events dramatically negated my potential wealth. The worse was my wife of 30 years divorced me 6 years ago. I still have a $1.1 M investment portfolio but it would have been two to three times this without these events. The good news is I'm happily remarried.

 

[omni550]

Those were the days of high mortgage interest rates and high inflation. I remember all of us engineers getting 2 raises in one year, just to keep up. Also, prices of things were increasing rrapidly, so there was a big fervor of "buy it now (before the price goes up), pay for it later ". Retirees and others on fixed income suffered as their buying power decreased. Repricing was the order of the day (for menus, stores, etc.), as the prices of most everything esclated. etc. etc.

As I and most of my peers didn't have much in the way of savings (due to starting our careers, paying off student loans, saving up to buy cars and homes, etc.), we didn't have much money to invest. And this was decades before the internet, so finding out about places that might offer higher interest rates on investments for any money that you might have to invest was limited to ads in the newspapers, magazines, or word-of-mouth. Very little direct mail, as I recall.

And let's not forget the stagflation (high inflation, low growth rate and high unemployment) of the early 70s. Not fun.

omni

 

[Koolau]

Stated before, I've left a lot of money on the table over the years by being too conservative. Still, I never got out of the market(s) and I'm doing well. With 20/20 hindsight, I most likely would have 5 times what I have now (wouldn't we all?) But I have enough. Mutual funds and some other (off the wall) stuff got me there. YMMV

 

[MRG]

Middle 80s. My employer gave us profit sharing for retirement. It was in a equity fund and Megacorp picked up the 1% ER.

Megacorp was in the fund industry and I remember some of the big events. Black Monday I was doing crisis and performance management when systems started acting a little odd. This was long before we could add capacity, heck we were running out of stuff(virtual storage) you had to pretend existed! It was an exciting time. Y2k, while a non-event, was a huge internal project that allowed some to accelerate their careers.

Those were the days of managed funds and fund companies bragging about loads. Seemingly unlimited expense reports and huge holiday parties. It really was a time of excess in the industry.

For years that was our only retirement and it was a pretty good run. Eventually we also got a decent 401k in addition to the profit sharing. The contributions to the profit sharing were offset by the 401k match.

 

[kaneohe]

For the forum members that were investing in mutual funds since 1980, I read the market averaged 16% plus for 18 years. Thats a long run. Did you stay the course? Did you re-balance? Did you cash out? Change your AA? If you remember, did you find the yearly returns unbelievable?
................................. Imagine 18 years at 16%?

.......then followed by 11 yrs of wandering around at avg 0% but better to
have had those 18yrs in the beginning so the luck of age.
Don't remember being wowed...maybe too busy working........and here I thought
it was me when it was just the market. Fortunately by then I had realized I was no good
at picking stocks and just picked funds and left them alone. Even active high expense funds
do ok when the market floats them along.

 

[DrRoy]

My equity AA in the 80's was only about 25%. From the 90's to a few years ago it was 80%+. I didn't really re-balance or cash out. For a long time I tried various schemes to "beat the market" that never worked, and eventually became an indexer. My average return from 1983 to 1999 was 14.7%.
I remember thinking that the returns in the 90's were fabulous, but did not recognize then how it was not sustainable. The early 2000's were disappointing. In mid 2001, I thought it was safe to try a re-balance move, only to have 9-11 hit and see new lows for another year. In 2003, after 3 years of losses, I figured I might as well go from a 30 to a 15 year mortgage, since it seemed like stocks could not make any money. Of course that was just when the next bull leg took off.
By 2004 I was back to my previous NW and by 2007 about 50% higher. It was a pleasing time and I was very confident. The 2008 bear was gut wrenching and I saw it all fall by about 50%. I did pull back a bit on the way down but I wanted to bail big time and stop the pain. I stuck it out, which was the right thing, and restored my AA in 2009.
I was back to the 2007 level of NW by 2012 and since then have added on as the market rose. For the last 2 years I have been slowly reducing the AA to 60% for RE earlier this year, and plan to continue a bit more if the market keeps rising.

 

[Al in Ohio]

For the forum members that were investing in mutual funds since 1980, I read the market averaged 16% plus for 18 years. Thats a long run. Did you stay the course? Did you re-balance? Did you cash out? Change your AA? If you remember, did you find the yearly returns unbelievable?

This question arose when I was in another thread doing the YTD change. Its over 10 %, but the dollar amount is staggering. Imagine 18 years at 16%?

I was a young man then putting anywhere from 6-12% of my salary into almost 90-100% stocks since my time horizon for retirement was far off. Plowing as much as you could afford into those kinds of returns was a no brainer. Mind you the average person realized about 3-4% below those stated returns due to human factors of fault,, but those were good years for wealth building. Made me a millionaire in my late forties.

 

[pb4uski]

I have been saving and investing since the late 1970s... was 100% equities back in the 1980s, but unfortunately the amounts were much smaller so the $ increase was not so noticeable... still thankful though.

 

[Ronstar]

I bought Janus Fund in the 70's, but sold it when I needed some money in the early 80's. I started my 401k in the mid 80's. I didn't really know what an AA was. I started with recommendations from the Edward Jones rep, then researched and made my own adjustments. Adjustments were to the fund classes that performed the best.

I went to cash to avoid the y2k snafu that never happened. Got back into equities late and missed part of a run up. I'll never try market timing again.

 

[flintnational]

The DW and I finished college, got married and began our careers in 81 and 82. We saved from that point forward. The amounts were small but we were 80% -90% stocks. We tended to have broad stock market exposure with managed funds (all index today). We never loaded up on tech but dipped our toes into some high fliers, TRP New Asia, Brandywine fund. Began moving to index funds in the 90's. We have never had much in bonds, but diversified with RE. The addition of RE was the only change in our investing plans. Reviewing my investing/retirement notes from those days is interesting. Before I heard of the Trinity study and the 4% rule, I assumed the market would return an average of 9% per year and I could withdraw 6% in retirement (9% - inflation). Apparently sequence of return risk says "no". But in my late 20's and early 30's it sounded like a plan.

FN

 

[pb4uski]

Yes, it is quite difficult to get your head around 4% being a safe witdrawal rate when the historical rate of return for a 60/40 portfolio has been double that. Part of it is because the withdrawals are increased for inflation and the other part is because sequence of return risk ends up being close a bad/worst case scenario.

The first part can be quantified and is not particularly significant... over a 30 year time horizon with 3% inflation, a ~4% constant return would end up with a balance of zero at the end of 30 years.

 

[sengsational]

As many commented, I wasn't always contributing, or investing as adeptly as more recently. IOW, I was pretty clueless and not even trying to get a clue.

I read the market averaged 16% plus for 18 years.

I'm not sure that's entirely accurate. Maybe if they cherry picked the years. I just did S&P 500 from 1980 to 2016 and got and average of 12.8%. Even that sounds like a lot, but there was an average of 3% inflation, so down to 9.8% real.

What might have hurt many of us was that we weren't investing as much when the average return was high. Split at year 2000 (arbitrarily), the average before and after are quite different (18.4% vs 6.2%).

There's a picture of my results, annualized rates of return over 1, 2, 4, 8 and since the early 80's. You see that the one year bounces all over the place, but the 8 year stays nominally positive.

 

[dtbach]

Funny how you chose 1980 because that is exactly when I started investing in mutual funds (and also foolishly individual equities that I had no business owning). I owned some great funds and some clunkers but in the end those fantastic decades allowed me to retire early in a pretty good situation.

That said, if I had just bought a couple of index funds and made it simple for myself, I would have had double what I have now

 

[kaneohe]

..........................
I'm not sure that's entirely accurate. Maybe if they cherry picked the years. I just did S&P 500 from 1980 to 2016 and got and average of 12.8%. ...................

I read OP as saying 18 yrs from 1980 so I think the 16% is prob. close.
If you extend 36 yrs from 1980, you also pick up a decade+ of 0% overall also that lowers the overall return to your number.

But you are correct that year selection does dramatic things to numbers.
E.g. if you do a 10 yr return, you can find funds that did very well compared to others. .......but if you do a "maximum" chart, you might find the same funds did no better or even worse. The reason that the 10 yr return looked so good may be because they did worse in a dip and only looked good because they recovered starting from a lower base.

 

[Blue Collar Guy]

I'm not sure that's entirely accurate. Maybe if they cherry picked the years. I just did S&P 500 from 1980 to 2016 and got and average of 12.8%.

There's a picture of my results, annualized rates of return over 1, 2, 4, 8 and since the early 80's. You see that the one year bounces all over the place, but the 8 year stays nominally positive.

...1982 and concluded during the dotcom bust in 2000. During this secular bull market - a term that denotes a bull market lasting many years - the Dow Jones Industrial Average (DJIA) averaged 16.8% annual returns.

Read more: Bull Market Bull Market
I wasnt totally on point with the dates, but yeah those were wicked returns.

 

[Blue Collar Guy]

Funny how you chose 1980 because that is exactly when I started investing in mutual funds (and also foolishly individual equities that I had no business owning). I owned some great funds and some clunkers but in the end those fantastic decades allowed me to retire early in a pretty good situation.

That said, if I had just bought a couple of index funds and made it simple for myself, I would have had double what I have now

Thank you for sharing. I figured if someone was in the market back then and was investing in index funds they would have "won" the game.

 

[MRG]

Thank you for sharing. I figured if someone was in the market back then and was investing in index funds they would have "won" the game.

Vanguard didn't start until 1975 and most thought this index thing was an albatross. The fund industry is a bunch of good old boys who all know each other. Boggle was thought to have hatched a blue-footed-boobie.

The 80s were a time of high fees, loads and no internet access. Everything was paper based and there were many delays and quality issues, that's just the way it was. There were huge barriers to change in the industry, but once technology became mature, the big fund companies all embraced technology solutions.

Much of my career was spent converting the processing of paper into strings of bits. Those improvements helped bring down expenses and improve quality of service. Vanguard's success can be seen in the continued lowering of ERs. Go look at ICI data on fund costs over time. Throw in the AUM of Vanguard for giggles.

 

[mathjak107]

no time frame stand alone .

so many times i get comments that i was so lucky to have been around for the greatest bull in history . but people forget that we had some nasty times leading in .the time frame just prior sucked so few of us "regular" people were able to save a thing .

401k's were not even in place yet in most companies .

so yeah the great bull was here , but it acted on relatively little money .

if you take the great bull and average it out with the time frame prior you get the same typical average returns .

same thing is true if you look at 1987 to 2003 . we had 17 years of 14% gains . average it out with the lost decade and nothing special .

 

[athena53]

If you've ever seen the American Funds charts of how $10K would have accumulated in various funds over 30 years, they're impressive- they have to use a logarithmic scale to get it on a decent-sized page!

The 80s were a bit of a blur to me. I saved the first half of that decade- even had an account at Merrill Lynch but, as mentioned earlier, no 401(k) and commissions on stock trades were steep. Then I met the man who would eventually become my first husband. What a financial disaster. His credit was in the toilet, he spent more than he made, he had WAY more"wants" than he could afford. I spent every spare dollar I had propping him up. Why? Blame it on my biological clock. We did eventually marry and that produced DS (who has given me a wonderful DIL and my beautiful granddaughters). I'm ashamed to list all the stuff I spent money on to pacify him (but let's start with taking on a $10K car loan in 1983 so he could buy a loaded Camaro).

So, I wasn't adding much new money to my savings back then and actually drew some down. I am where I am today because of some subsequent good breaks (especially profits on 2 primary home sales) and generally sound decisions. The years of sky-high returns were also years of rampant inflation. As I've discovered from my own modeling in Excel, the most important variable is not the investment return rate or the inflation rate- it's the delta between the two. If you're making 12% but inflation is 8%, you're not much better off over the long run than if you're making 6% and inflation is 4%.

 

[MRG]

If you've ever seen the American Funds charts of how $10K would have accumulated in various funds over 30 years, they're impressive- they have to use a logarithmic scale to get it on a decent-sized page!
...snip...

+1

Those were the glory years for American Funds. IIRC They were number 2 in AUM back then.

I was w*rking rking at a place they outsourced some of their IT to. Their systems were very challenging to support due to very high volumes.

The team I was on was challenged to come up with unique solutions to sustain their loads. Interesting times, probably the best parts of my career.

Who would have thought that running out of resources you had to pretend existed was possible? Or fixing the imaginary problems would lead to career advancements? Haha pretty funny now. We worked a lot of late hours fixing imaginary problems.

 

[Gill]

After the dismal stock market of the '70's, I gradually invested primarily in municipal bonds during the '80's. it was pretty tough to turn down 6% or more tax free. I eventually returned to equities but missed some of the equity rally that followed.

 

[LuckyDog]

The returns didn't seem to be that big. We started investing in the early '80's. You could get 12 or 13% on a 6 month CD at that time. There were big returns for a lot of the years in the 80's and 90's. But to us, even though the percentages were high, the amount of real $$ gained was not so big since the total invested was not so big. In a lot of ways, high returns were kind of the normal. Plus it was just money on paper and retirement was years and years away.

 

[Texas Proud]

Yes, I invested... but the big problem is that I did not make much... my first job out of college was '83 and I made a bit over $23K....

The limit was $2,000 when I started... so that means a whopping $14K put aside for the whole decade... the rest was spent...


So even if I had a great year in returns, it was so low a balance it did not matter.... no AA change as I was 100% into stocks and was that way for more than 30 years...