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It's Brighter, In The Long Run
Let’s look at long-term investors. They’re down, but not as out as you might think.
If you’d owned all the Dow stocks for the five years ending Dec. 31, 2008, you’d be down 5.5 percent for the entire period.
Five-year holders of the Nasdaq index were down 18 percent and of the S&P 500, down 10.5 percent. This is on a total return basis, meaning price changes plus any dividends.
This is supposed to make you feel better.
Because these five-year returns are significantly higher than what happened in the 12 months we just finished.
Last year was all-out awful. The Nasdaq fell almost 41 percent in price alone. S&P, negative 39 percent, the Dow lost 34 percent.
But the addition of time and dividends helps overcome even awful years.
2008 was just one year.
It is so easy to forget, the markets were up four years out of the last five.
If you look at all this on a chart, you’d realize that investors in these three indexes were ahead of the game during those first four – strongly ahead, too, if you were in large-company stocks – before 2008 came along and blew up all their gains or more.
Harriet Johnson Brackey, the personal finance writer for the Sun-Sentinel, has been an award-winning business...
Comments
Harriet,
Sure it,s better to look at the five-year picture than the one-year, but investors true concern is: 'What about the next 5 (or any other number) years?'
What's an investor to do?
Stay the course and risk another pounding?
Buy and hold, knowing the prices are a bargain compared with where they were a year ago?
The 'correct' answer will be known only in hindsight.
There is an alternative - and that's to invest with reduced risk by using hedging techniques that limit losses and still allow for significant profits. I know I've delivered this message previously, but I know that many investors can benefit by using conservative option strategies.
Happy New Year.
Mark Wolfinger
http://blog.mdwoptions.com/options_for_rookies
Posted by: Mark Wolfinger | January 5, 2009 1:43 PM
There is nothing in the rulebook that states that history HAS to repeat itself.
Todays times are much different then they were back in 1929.
Posted by: MOJO | January 5, 2009 4:53 PM
So five years ago would it have been better to put your money under your mattress or in the stock market?
Posted by: dave2 | January 7, 2009 1:22 PM
I think, five years ago, most people put their money in to a house. And they may still be ahead, some by pretty far.
Posted by: Harriet Johnson Brackey | January 7, 2009 4:04 PM
I think, five years ago, most people put their money in to a house. And they may still be ahead, some by pretty far.
Posted by: Harriet Johnson Brackey | January 7, 2009 4:04 PM
Those that have index funds didn't make out so bad. But if you were one of the unlucky ones to drop your investments into a big fund that went bankrupt, well, it's a different story.
Posted by: Nick | January 9, 2009 2:31 PM