If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at http://www.rwinvestmentstrategies.com. If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.
Friday, April 8, 2011
A financial columnist for Financial Planning magazine, Bob Veres, has written an insightful article discussing the difference between investing and gambling in which he provides some performance numbers for the so-called lost decade.
He states that, over the 10-year period ended 12/31/2009, the Wilshire 5000 had a negative average annualized return of -0.2% but the mid-cap index was up 4.6%/year and the small cap index rose 4.3% on average per year. International stocks lost -1.1% on average per year.
He goes on to say that with "...a reasonable percentage of bonds..." and rebalancing at least every year and "...at best opportunistically..." aggregate returns would have ended up a bit higher than 3%. As he points out, this isn't a performance that gets you "...shrieking in triumph"... but it did beat the rate of inflation.
All of this is used to argue that the odds in investing, even over a period of horrible luck relative to historical performance, are considerably better than you'll find in Vegas and other realms of the gambling world. My take-away is that, although the decade was a rough patch, it wasn't really a "lost decade" especially for those who followed the principles of diversifying among asset classes and rebalancing. This, of course, hasn't even touched on those who took advantage of dollar-cost averaging.