Comments on: ‘Lost Decade’ for Stocks http://www.canadiancapitalist.com/lost-decade-for-stocks/ Helping you invest and prosper Sat, 11 Feb 2012 19:27:54 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Phil S http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-124067 Phil S Sat, 29 Mar 2008 01:07:21 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-124067 While the index may not have moved much between the two points of measure in the index, anyone would have to admit that the composition of the index has had some major "churn". During the dot-gone bubble, I think Nortel made up 30% of the index. Before that, Bre-X was a TSE300 large cap stock as well before it imploded. I'm not a fan of indexing, but it looks like I will have to accept a few index funds in my pension plan as I am about to begin a new job with a defined contribution plan. For choices, the pension plan only has some index funds and some fund-of-funds available to invest in... Poor choices in my opinion, but at least the index funds have low MERs and since the employer kicks in a good 50% on top of what we put in, it's kind of like an immediate 50% ROI. That part's kind of a no-brainer. While the index may not have moved much between the two points of measure in the index, anyone would have to admit that the composition of the index has had some major “churn”. During the dot-gone bubble, I think Nortel made up 30% of the index. Before that, Bre-X was a TSE300 large cap stock as well before it imploded.

I’m not a fan of indexing, but it looks like I will have to accept a few index funds in my pension plan as I am about to begin a new job with a defined contribution plan. For choices, the pension plan only has some index funds and some fund-of-funds available to invest in… Poor choices in my opinion, but at least the index funds have low MERs and since the employer kicks in a good 50% on top of what we put in, it’s kind of like an immediate 50% ROI. That part’s kind of a no-brainer.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-123752 Canadian Capitalist Thu, 27 Mar 2008 19:27:23 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-123752 onarock: It depends on what your target is. If it's retirement at 65, your time frame might still be 20 years or more. IMO, assuming, you have a suitable allocation of equities, it still makes sense to have a portion of that in US stocks. Calin: I agree that expectations for double-digit equity returns are not reasonable going forward. Low returns of the order of 7% are more likely but that's still generous considering bonds are yielding as low as 3.5% today. Neil: I truly believe in holding a diversified portfolio holding many asset classes, keeping down costs and controlling our emotions. I simulated investing $1,000 in 1997 in a portfolio similar to the Sleepy Portfolio and plugged into this calculator (<a href="http://www.ndir.com/cgi-bin/downside_adv.cgi" rel="nofollow">Link</a>) and the results show an average return of 7.1%. onarock: It depends on what your target is. If it’s retirement at 65, your time frame might still be 20 years or more. IMO, assuming, you have a suitable allocation of equities, it still makes sense to have a portion of that in US stocks.

Calin: I agree that expectations for double-digit equity returns are not reasonable going forward. Low returns of the order of 7% are more likely but that’s still generous considering bonds are yielding as low as 3.5% today.

Neil: I truly believe in holding a diversified portfolio holding many asset classes, keeping down costs and controlling our emotions. I simulated investing $1,000 in 1997 in a portfolio similar to the Sleepy Portfolio and plugged into this calculator (Link) and the results show an average return of 7.1%.

]]> By: Neil http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-123742 Neil Thu, 27 Mar 2008 18:26:44 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-123742 I had a a lump of money invested in 1997. It's returned approximately nothing since then. This obviously colors my experiences, but I find a lot of the talk about equities being the best returns over the long term suspicious. After all, we only have what, 90 years of experience? In any other field, like weather forecasting, this would be a laughably small 'n' to base predictions on. I had a a lump of money invested in 1997. It’s returned approximately nothing since then. This obviously colors my experiences, but I find a lot of the talk about equities being the best returns over the long term suspicious. After all, we only have what, 90 years of experience? In any other field, like weather forecasting, this would be a laughably small ‘n’ to base predictions on.

]]> By: Calin http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-123736 Calin Thu, 27 Mar 2008 17:52:35 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-123736 I don't want to start a debate between "true believers" and "infidels" on this issue, but the message (in my opinion) is that the last decade meant turbulence with limited rewards, if any, for the average investor (big or small), with a special "bonus" for Canadians/Europeans that bought US securities (in USD; 1 Euro was 0.89 USD just a couple of years ago). "Long term" is a fuzzy concept even for indexes (forget individual stocks: the once-mighty Nortel is a pre-split 50-cent stock now); life (as in marriage, divorce, death, illness, children, relocation, job loss etc.) often means unexpected expenses at unplanned moments. Yes, the stock market has opportunities but the expectations might still be too high while underestimating the risks (and North-America averages from the past might be less relevant in a world where the US dollar won't be down the road what it's been after WWII). I don’t want to start a debate between “true believers” and “infidels” on this issue, but the message (in my opinion) is that the last decade meant turbulence with limited rewards, if any, for the average investor (big or small), with a special “bonus” for Canadians/Europeans that bought US securities (in USD; 1 Euro was 0.89 USD just a couple of years ago).
“Long term” is a fuzzy concept even for indexes (forget individual stocks: the once-mighty Nortel is a pre-split 50-cent stock now); life (as in marriage, divorce, death, illness, children, relocation, job loss etc.) often means unexpected expenses at unplanned moments.
Yes, the stock market has opportunities but the expectations might still be too high while underestimating the risks (and North-America averages from the past might be less relevant in a world where the US dollar won’t be down the road what it’s been after WWII).

]]> By: Pharmadaddy http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-123732 Pharmadaddy Thu, 27 Mar 2008 17:33:14 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-123732 Allow me to add to my previous comment. Just for an intellectual exercise, I looked to see what would happen had I invested $4000 per month in my current portfolio starting April 1, 1999 (I could in no way afford that, but luckily Globefund.com allows me to see what would happen; besides, a percentage is a percentage). Having made regular contributions instead of a lump sum contribution, my annualized return would be a respectable 7%, which is a number I have based many of my retirement calculations on anyways, so I am happy with that! Allow me to add to my previous comment. Just for an intellectual exercise, I looked to see what would happen had I invested $4000 per month in my current portfolio starting April 1, 1999 (I could in no way afford that, but luckily Globefund.com allows me to see what would happen; besides, a percentage is a percentage). Having made regular contributions instead of a lump sum contribution, my annualized return would be a respectable 7%, which is a number I have based many of my retirement calculations on anyways, so I am happy with that!

]]> By: Cheap Canuck http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-123729 Cheap Canuck Thu, 27 Mar 2008 17:13:53 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-123729 I see this time period as a tremendous buying opportunity. But I have 25-30 years until I start tapping into my portfolio for income. If my timeline was 5-10 years I might be pretty nervous about buying equities in the current environment. I see this time period as a tremendous buying opportunity. But I have 25-30 years until I start tapping into my portfolio for income. If my timeline was 5-10 years I might be pretty nervous about buying equities in the current environment.

]]> By: Pharmadaddy http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-123727 Pharmadaddy Thu, 27 Mar 2008 17:00:04 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-123727 If I had invested even a lump sum of $4000 in my current portfolio on April 1, 1999, it would have gained almost 16% per year, and that is with 90% of it in equities. And that's only over 9 years. Plus, like other commentators have mentioned, you only go to the supermarket when prices are lowest, not when they are exorbitant. Now, if anything, is a time to buy, not a time to panic and run. If I had invested even a lump sum of $4000 in my current portfolio on April 1, 1999, it would have gained almost 16% per year, and that is with 90% of it in equities. And that’s only over 9 years. Plus, like other commentators have mentioned, you only go to the supermarket when prices are lowest, not when they are exorbitant. Now, if anything, is a time to buy, not a time to panic and run.

]]> By: onarock http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-123721 onarock Thu, 27 Mar 2008 16:07:39 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-123721 "the really long-term of two decades or more." I don't have this long of time............. k “the really long-term of two decades or more.”

I don’t have this long of time………….

k

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-123706 Canadian Capitalist Thu, 27 Mar 2008 14:24:28 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-123706 Yves: I personally have 22.5% allocated to US equities and since I started investing in 2000, the returns have been very poor: first it was the market crash, then the appreciation of our dollar. But that's the way it goes. I'm just sticking to the target and 'staying the course' as Bogle would say. Preet: We can add the Time magazine cover 'Home $weet Home' to the list as it seemed to have marked the top of the housing boom. (<a href="http://www.canadiancapitalist.com/2005/06/23/this-and-that-7" rel="nofollow">Link</a>) I also find it interesting that Buffett warned in a 1999 Forbes article about low stock returns due to the high valuation. Yves: I personally have 22.5% allocated to US equities and since I started investing in 2000, the returns have been very poor: first it was the market crash, then the appreciation of our dollar. But that’s the way it goes. I’m just sticking to the target and ‘staying the course’ as Bogle would say.

Preet: We can add the Time magazine cover ‘Home $weet Home’ to the list as it seemed to have marked the top of the housing boom. (Link)

I also find it interesting that Buffett warned in a 1999 Forbes article about low stock returns due to the high valuation.

]]> By: Kris http://www.canadiancapitalist.com/lost-decade-for-stocks/#comment-123703 Kris Thu, 27 Mar 2008 14:17:35 +0000 http://www.canadiancapitalist.com/2008/03/26/lost-decade-for-stocks#comment-123703 Articles like this should be forced to do a sensitivity anaslysis on their start/end dates - to avoid cherry picking bubbles. The information would be more valuable albeit less shocking. Articles like this should be forced to do a sensitivity anaslysis on their start/end dates – to avoid cherry picking bubbles. The information would be more valuable albeit less shocking.

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