That line of argument has been true in the past, for the United States stock market. It is not true for all countries. It is not guaranteed to be true in the future.
In 1990, Japan’s Nikkei index reached almost 40,000. Over the next couple years, it plunged, losing most of its value. Throughout the 1990’s, it hovered around 20,000. Today it is still below 20,000. So if you’d invested in Japanese stocks in 1990, you would have lost half of your money and never gotten it back.
In the United States, we tend to think that we’re better than other countries. We’re larger, we have a more diversified economy, and we’re just plain smarter, so something like that couldn’t possibly happen to us. Maybe we’re right. On the other hand, maybe we’re wrong. I’ve decided not to gamble on it. This is simply my decision. I’m not critiquing anyone else’s decisions.
My preferred bond fund, the Vanguard Long-Term Bond Index Fund (VBLTX), has pulled in 7.5% annually since inception. How does that compare to stocks? Well, it depends on what period of time you pick. For the past 5 years, the stock market has done way better than that. For the past 10 years or the past 15 years, they’re about equal.
Then consider expenses. If I’m constantly buying and selling stocks, it costs money to make those transactions. If I just park my money in a bond fun, expenses are negligible, running around 0.20% per year.
Then consider tax advantages. And when adding it all together, a bond fund doesn’t look so bad after all.
Feh, it depends on what you want. I just did a breakdown on it - I’m at the office this afternoon returning calls - and indeed it averages 7.55% since inception (sometime in 1994). Since inception is a tricky thing, though.
So for the last three years you’re beating inflation…but not by much and only if you calculate it right.
Let’s look at some others…
S&P Value Fund
Inception (May 2000): 5.12%
Trailing 10-year: 6.22%
Trailing 5-year: 14.31%
Trailing 3-year: 16.46%
Specific Mutual Fund Three Pack Which I’m Not Allowed to Name*
Since Inception (Earliest Common) July 1987: 9.28%
Trailing 10-year: 6.27%
Trailing 5-year: 10.87%
Trailing 3-year: 10.83%
The above two illustrations are factored for maximum fees. No discounts, no breakpoints. Nothing. We can see where 2008 hammered the equities by the huge drop between the trailing 10-year and 5-year illustrations.
The above three-pack is slightly more conservative than moderate. It runs mostly dividend payers and about 55% bonds.
I’m not really criticizing your choice, ITR. What you do with your money is your problem. You ain’t my client and I ain’t your guy. Without knowing your age, risk tolerance and long-term retirement and spending plans no one here can make a case for or against.
*Literally not allowed by my employer on a message board.
Nyeh, the tax advantages aren’t really there in that fund when you consider that more than half, more than 60% compared to the prospectus, are in corporate taxable bonds. It doesn’t mention munis but does mention US Treasuries. Those won’t be state taxable but are federally taxable so again, if there’s an advantage it would likely be negligible.
Your first paragraph though is dead on. Everyone who bring up index funds assumes that the investor competing with the index is buying and selling at a fast clip. That’s foolishness. Buy good investments with good management and a good track record and beating the indexes - even factoring in upfront commissions - is actually pretty straightforward.
Do you think a correction turns around in one weekend and heads ever upward after that? There can be a dead cat bounce and a recovery. They are not mutually exclusive.
A dead cat bounce is a temporary upswing in a generally down market. Do you think the market going forward is best characterized as a “dead cat”? If not, then it’s not a dead cat bounce.
I believe the market will recover significantly on Monday. It may lose that again in the short run, but I stand by my prediction that this a correction, not a crash. In the months ahead it will recover, and set new a market high within one year. That is why I used the term dead cat bounce. I’m not sure why you pounced on this. What do you think going to happen?
He’s pouncing on the term dead cat. That implies you think that the market is going to bounce Monday, and keep going down for a significant time - i.e. not be back at a high within a year. By the way, I think we haven’t seen the bottom yet either - we are heading into Fall - often a pessimistic time for the Market - and there are a lot of long term global events that aren’t a perfect storm, but I think will create a tempest in a teapot - but I don’t think it will go on for months. On the other hand, I tend to do most of my stock investing the the Winter and Spring when buyers tend to be more optimistic.
In an earlier post in this thread I said I watched the futures indexes all week long. They all said the markets were going up, and they didn’t. After the Friday close the futures index had a slight negative number. This morning the futures indexes are triple digit negative.
If the markets do not recover with a dead cat bounce, we are in freefall that will not stop for a while. I stand by my prediction the DJIA will hit 10,000.
It doesn’t matter what I think. You stated two contradictory things: That we’re “at the bottom” of the correction and that there will be a “dead cat bounce” shortly. A dead cat bounce does not happen at “the bottom”, so both of those things cannot be true. A dead cat bounce happens before you hit the bottom, and implies that the bottom is a ways off form where we are at present.
I’m guessing that you actually think the first thing is true and are using the term “dead cat bounce” incorrectly.
Exactly. Ifyou don’t need the cash now, or soon, ride it out. If you need it short term (5 yrs or less), you should already have withdrawn those funds. Otherwise, keep contributing or buying.
when buyers tend to be more optimistic.