The Lost Decade for S&P 500 Index, an Update ‘Eleven Years After’

  • Written by David
  • May 24, 2011 at 8:39 pm
  • 0
  • This work comes from Doug Short. The Lost Decade for the S&P 500 Calculations are from the  March 24, 2000 tech bubble high (The NASDAQ all time high of 5,054) to May 20, 2011.

    A $1,000 invested in March 2000 has merely grown to $1,070.00 eleven years later, in nominal terms. (not adjusted for inflation; you know, that pesky phenomenon of rising prices)

    Adjusting for inflation, that same $1,000 invested on March 24, 2000 is now only ‘worth’ $809.00 eleven years later. This is true loss of ‘purchasing power’. The biggest risk to all of us, long-term.

    Most notable, observe the March 2009 lows of that $1,000 falling to $518 (not adjusted for inflation), and to $417 (inflation adjusted). Of course, stock mutual fund flows have told us, many investors ‘bailed’ at the 2009 market bottom as they probably did not have an investment strategy in place to know why they were investing.

    One must thank Fed Chairman Ben Bernanke for squirting lighter fluid on our charcoal briquette cold economy since 2008 for getting investors back to ‘breakeven’ ten years later.

    Short’s comments,

    “For the sake of comparison and to validate the calculation method, we can compare the nominal return in the chart above to Vanguard’s 500 Index Investor Fund (VFINX), which has had a return of $1,057. Over the same timeframe The SPY ETF has returned $1,044.

    We’re now over eleven years beyond the S&P 500 2000 high. This little charting exercise gives credence to the frequent reference to a “lost decade” for investors. It also offers support for the wisdom of diversification across asset classes.”

    Clients of David Gratke Wealth Advisors, did not incur these tremendous market losses as shown in the above chart during 2008-2009. Please visit my blog articles and podcasts (below) on wealth preservation and the use of asset classes that protect portfolios from large loss during market declines.

    Podcast: Inverse Assets, (click here to listen to Podcast) In this podcast David Gratke discusses what Inverse Assets are, and how they may be used to protect client accounts from large loss in market downturns.

    Blog Postings:Wealth Preservation, Inverse Assets;

    Search for Safety, Safe assets: nowhere to hide?

    Investment Opportunities in a Down Market

    There are always opportunities within any market. The question is, how is an investor adjusting their asset allocation strategies to take advantage of current market opportunities, if at all? Coffee?

    A Cup of Coffee and a Second Opinion

    When the markets turn as volatile and confusing as they have over the past year, (heck, past eleven years now) even the most patient investors may come to question the wisdom of the investment plan that they’ve been following.

    At David Gratke Wealth Advisors, LLC, we’ve seen a lot of difficult markets come and go over the past twenty-three years. And we can certainly empathize with people who find the current environment troublesome and disturbing. We’d like to help, if we can, and to that end, here’s what we offer, a cup of coffee, and a second opinion.

    By appointment, you’re welcome to come in and sit with us for a while. We’ll ask you to outline your financial goals – what your investment portfolio is intended to do for you. Then we’ll review the portfolio for and with you.

    If we think your investments continue to be well-suited to your long-term goals – in spite of the current market turmoil – we’ll gladly tell you so, and send you on your way. If, on the other hand, we think some of your investments no longer fit with your goals, we’ll explain why, in plain English. And, if you like, we’ll recommend some alternatives.

    Either way, the coffee is on us. Thanks for reading.


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