Page 2 shows the same results using a $100,000 portfolio at the beginning of the period as well as a graph of the various sector returns over the 20-year period. Both are worth examining.
$100,000 Investment Over 20 years:
In 1987, the stock market crashed. In one day, the Dow Jones Industrial Average dropped over 24%! This was a period where the U.S. had come through a Savings & Loan Crisis that cost the nation hundreds of billions of dollars. This was a period where the U.S. experienced a serious banking crisis with the number of bank failures rising to levels not seen since the 1930s.
For the 20-year period covered by the table, there were many reasons, all along, to be investment shy. There was the East Asian crisis, the Russian default, Y2K fears, the dot.com bubble, the 2008 housing crisis/Great Recession ,etc. just to name a few.
Still, over this period, $100,000 increased to $461,667! Although investors saw clearly the problems mentioned, what wasn't so easy to see were the advances that would be forthcoming- the internet, PCs, cell phones, medical advances, and tremendous global growth!
The Table also shows standard deviation - the basic volatility measure. As you can see, the volatility was considerably less than the 3 sectors with higher returns. This is the mathematical expression of the visual depiction we saw in the last post.
The graph is also worth contemplating.
What should also be noted is that the systematic investor would have done even a lot better than the results shown in the Table because of so-called dollar averaging. During the downturns, the systematic investor would have picked up shares at especially attractive prices.
The conclusion isn't rocket science and is stark. Most people who consistently saved and invested over this period using low-cost index funds diversified properly should be in great shape today for retirement or at least on the path to a great retirement.