This is quite interesting. Thanks for the explanationTamalak wrote: ↑Mon May 23, 2022 11:44 am If my egg laying chicken costs $20 and lays a $1 egg per year, I make 5% a year.
If inflation is 2% for that year then both chicken and eggs go up in price 2%, which means my net worth does too, on top of the 5% return for the egg. I end up with 5% real return and 7% nominal.
Historical PE has averaged about 17. It is no coincidence that historical earnings have averaged about 6% real (1 / 17)
Is it possible that the market takes more than a decade to recover?
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Re: Is it possible that the market takes more than a decade to recover?
Re: Is it possible that the market takes more than a decade to recover?
I missed that thanks.
If we talk real returns a 25x portfolio only needs 1.5% annually to last 30 years. As such, a ten year period at 0% within that 30 years should not be of major concern. During accumulation one could easily end up with a few percent real, and that analysis should be performed. 10 years of accumulation with their own positive returns is significant to overall portfolio returns, particularly if income is highest in this last 10 years.
Those truly concerned about 0% real returns over longer periods of time can save up to a 30x+ portfolio and very likely be just fine.
Last edited by abc132 on Mon May 23, 2022 12:11 pm, edited 3 times in total.
Re: Is it possible that the market takes more than a decade to recover?
Lets look at the stock market PE ratio and currently it is 18. This means, you are paying 18 times current year earnings to own the market Look at it as if you are buying a company and you are paying 18 times it current year profits to own it. This means you need to wait for 18 years to break even if the earnings remain constant. After 18 years all future earnings are free for you to enjoy forever! Let that just sink in.
Typically over the longer term, earnings dont remain constant but increase with inflation. It is like wages always go up, prices go up and so profits too go up. That is what capitalism is all about. Hence they say stocks are the best hedge for inflation.
In case of Nikkei in 1986 peak, the PE ratio was 57. This means you have to wait for 57 years with constant earning to break even. So no wonder, Nikkei hasnt reached its previous peak. Also to make matters worse Japan went through deflation. Deflation is opposite of inflation, which means prices go down, wages go down and profits go down. So that kind of high valuations combined with deflation is what screwed up Nikkei.
But we are now worried about inflation and the PE ratio is only 18. So I think stocks are good bet in this environment. If we have a 10 year period of no returns like in the 70s runnaway inflation period, it just means at the end of it you will another 10 years of roaring stock market returns which will make up for this prospective lost decade.
So yeah, to summarise we could have 10 years of no returns, but dont lose heart, try and keep investing for the next 10 years, hopefully you are not retiring in the next 10 years. So you are going to become very rich after 20 years from now, there is very little doubt about that.
Typically over the longer term, earnings dont remain constant but increase with inflation. It is like wages always go up, prices go up and so profits too go up. That is what capitalism is all about. Hence they say stocks are the best hedge for inflation.
In case of Nikkei in 1986 peak, the PE ratio was 57. This means you have to wait for 57 years with constant earning to break even. So no wonder, Nikkei hasnt reached its previous peak. Also to make matters worse Japan went through deflation. Deflation is opposite of inflation, which means prices go down, wages go down and profits go down. So that kind of high valuations combined with deflation is what screwed up Nikkei.
But we are now worried about inflation and the PE ratio is only 18. So I think stocks are good bet in this environment. If we have a 10 year period of no returns like in the 70s runnaway inflation period, it just means at the end of it you will another 10 years of roaring stock market returns which will make up for this prospective lost decade.
So yeah, to summarise we could have 10 years of no returns, but dont lose heart, try and keep investing for the next 10 years, hopefully you are not retiring in the next 10 years. So you are going to become very rich after 20 years from now, there is very little doubt about that.
Re: Is it possible that the market takes more than a decade to recover?
Interesting.. a bond's "investment horizon" is the term of the bond - the point at which you're definitely going to get your money back plus the underlying returns unless disaster strikes. You could say that a stock's "horizon" in years is the PE of the stock - albeit, with a greater chance of disaster.revhappy wrote: ↑Mon May 23, 2022 12:02 pm Lets look at the stock market PE ratio and currently it is 18. This means, you are paying 18 times current year earnings to own the market Look at it as if you are buying a company and you are paying 18 times it current year profits to own it. This means you need to wait for 18 years to break even if the earnings remain constant. After 18 years all future earnings are free for you to enjoy forever! Let that just sink in.
Has there ever been a period where you haven't made at least 0% real returns after x years, where x is the PE at the start year? I don't think so. In fact I wonder what % real gain above 0% you can plug in before you find a starting year that fails.
Re: Is it possible that the market takes more than a decade to recover?
Of course it is possible for the market to take 10 years to recover.
But if you can continue adding to your investments and avoid panic selling, it probably won’t take *you* 10 years to recover.
But if you can continue adding to your investments and avoid panic selling, it probably won’t take *you* 10 years to recover.
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Re: Is it possible that the market takes more than a decade to recover?
here's some more info going back to 1928:
https://fourpillarfreedom.com/heres-how ... ince-1928/
https://fourpillarfreedom.com/heres-how ... ince-1928/
During the worst 10-year period (1999-2008), the S&P 500 delivered -3.8% annual returns...
During the worst 20-year period (1929-1948), the S&P 500 delivered 0.6% annual returns...
The S&P 500 never delivered negative annualized returns in any 20-year period.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
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Re: Is it possible that the market takes more than a decade to recover?
Check out Europe:Morik wrote: ↑Sun May 22, 2022 10:49 pm Of course there is a possibility the market could take more than 10 years to recover.
There is a possibility the market could go down a whole lot and stay down for a long time.
This is part of the risk of investing in equities.
Is it very likely? I don't think it is very likely--we have seen this happen with the Japanese market, but as far as I'm aware that is the only example that is spoken of regularly.
If this were a very likely thing, I would think we'd have seen it happen more often.
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Re: Is it possible that the market takes more than a decade to recover?
Even these calculations are based on the assumption that you invested once at the beginning of the period, and never again. Most people don't invest that way. A more typical way of investing is to invest with each paycheck, so that you're contributing a certain amount throughout the entire period.arcticpineapplecorp. wrote: ↑Tue May 24, 2022 7:31 am here's some more info going back to 1928:
https://fourpillarfreedom.com/heres-how ... ince-1928/
During the worst 10-year period (1999-2008), the S&P 500 delivered -3.8% annual returns...
During the worst 20-year period (1929-1948), the S&P 500 delivered 0.6% annual returns...
The S&P 500 never delivered negative annualized returns in any 20-year period.
Play with portfoliovisualizer.com. Go to these bad time periods and plug in your own numbers that reflect the way that you actually invest. You'll likely discover that you actually had positive returns even in this rare market which had a 10-year down market. (Actually, I don't think that tool goes back to 1929, but you can do a 10-year test.)
Make sure you have an adequate emergency fund, and adjust your stock/bond ratio to meet your requirements. If you're 100% equities and you want 70/30 split, just add your new investments to the bond side for now. When you hit your annual rebalance day, rebalance your portfolio to address any remaining issue.
Make sure you write down your investing plan in an investor policy statement. Plan out what you will do if markets turn south. Plan out how you will approach your requirements at the 10-year mark. Then follow your plan.
Re: Is it possible that the market takes more than a decade to recover?
Someone contributing a constant amount per month starting in January 1999 still had not recouped their initial investment by December 2009, 11 years later. In that example, a regular contribution of $100 each month (adjusted for inflation over time) would be expected to yield a portfolio worth $13,200 after 11 years if there's zero real return. Instead, the market returned a portfolio worth $12,926, or a real loss over 11 years of periodic investing.wolf359 wrote: ↑Tue May 24, 2022 7:48 amEven these calculations are based on the assumption that you invested once at the beginning of the period, and never again. Most people don't invest that way. A more typical way of investing is to invest with each paycheck, so that you're contributing a certain amount throughout the entire period.arcticpineapplecorp. wrote: ↑Tue May 24, 2022 7:31 am here's some more info going back to 1928:
https://fourpillarfreedom.com/heres-how ... ince-1928/
During the worst 10-year period (1999-2008), the S&P 500 delivered -3.8% annual returns...
During the worst 20-year period (1929-1948), the S&P 500 delivered 0.6% annual returns...
The S&P 500 never delivered negative annualized returns in any 20-year period.
Play with portfoliovisualizer.com. Go to these bad time periods and plug in your own numbers that reflect the way that you actually invest. You'll likely discover that you actually had positive returns even in this rare market which had a 10-year down market. (Actually, I don't think that tool goes back to 1929, but you can do a 10-year test.)
Make sure you have an adequate emergency fund, and adjust your stock/bond ratio to meet your requirements. If you're 100% equities and you want 70/30 split, just add your new investments to the bond side for now. When you hit your annual rebalance day, rebalance your portfolio to address any remaining issue.
Make sure you write down your investing plan in an investor policy statement. Plan out what you will do if markets turn south. Plan out how you will approach your requirements at the 10-year mark. Then follow your plan.
Re: Is it possible that the market takes more than a decade to recover?
And Brazil and others:Tellurius wrote: ↑Mon May 23, 2022 6:29 amNobody talks about the Italian stock market and I don’t know why.Morik wrote: ↑Sun May 22, 2022 10:49 pm Of course there is a possibility the market could take more than 10 years to recover.
There is a possibility the market could go down a whole lot and stay down for a long time.
This is part of the risk of investing in equities.
Is it very likely? I don't think it is very likely--we have seen this happen with the Japanese market, but as far as I'm aware that is the only example that is spoken of regularly.
If this were a very likely thing, I would think we'd have seen it happen more often.
The Spanish stock market is similar but Italy has many more worldwide companies.
Yet after the 2000 crash it took more than 10 years to recover (I think price wise it still has not recovered?)
https://en.wikipedia.org/wiki/List_of_s ... ar_markets
Re: Is it possible that the market takes more than a decade to recover?
Investing in things that give you dividends also help giving real returns. Not because of the dividend themselves, but because they are indicative that a company is healthy, and that money can be reinvested in other things. If you invested in VIG in 2008 with a $10,000 initial investment and added $100 each month, you would have a real return of 3.94% in 3 years. By comparison, the Vanguard 500 Index investor would give you a negative return of 1.83% (all values here adjusted for inflation).
By comparison, even though an S&P ETF is balanced, it focuses more on growth, so it's a bit more speculative.
By comparison, even though an S&P ETF is balanced, it focuses more on growth, so it's a bit more speculative.
Re: Is it possible that the market takes more than a decade to recover?
If you adjust for inflation, not only has Brazil NEVER recovered from 2008, but accumulated returns are so low that your growth over time is negative (!).ndomorph wrote: ↑Tue May 24, 2022 8:56 amAnd Brazil and others:Tellurius wrote: ↑Mon May 23, 2022 6:29 amNobody talks about the Italian stock market and I don’t know why.Morik wrote: ↑Sun May 22, 2022 10:49 pm Of course there is a possibility the market could take more than 10 years to recover.
There is a possibility the market could go down a whole lot and stay down for a long time.
This is part of the risk of investing in equities.
Is it very likely? I don't think it is very likely--we have seen this happen with the Japanese market, but as far as I'm aware that is the only example that is spoken of regularly.
If this were a very likely thing, I would think we'd have seen it happen more often.
The Spanish stock market is similar but Italy has many more worldwide companies.
Yet after the 2000 crash it took more than 10 years to recover (I think price wise it still has not recovered?)
https://en.wikipedia.org/wiki/List_of_s ... ar_markets
For example, if you invested in EWZ (dollar-adjusted Brazilian Index equivalent to Ibovespa), in 2006, you would only have 9,251 in 2022 adjusted for inflation, EVEN IF YOU CONTRIBUTED $100 EVERY MONTH ADJUSTED FOR INFLATION. By comparison, the Vanguard 500 Index would give you $30,357 adjusted for inflation (or $43,749) nominally. That's 3 times more!
Re: Is it possible that the market takes more than a decade to recover?
We've been investing for 36 years and have spent from our investments before retirement from time to time. You don't have to pair that spending with specific bags of cash or bonds or whatever. Pick an asset allocation you can be comfortable with for the very long term and if you need to spend some if it along the way - well do so. You might be selling some securities at lower prices than some prior market peak but oh well......halivingston wrote: ↑Sun May 22, 2022 10:41 pm I say 10 years because, it is a long enough time horizon that my family situation will have changed, and I will need something out of my investments, but also that markets can decline for extended periods of time.
Equity ownership is more profitable than the alternatives over the long haul so you are coming out ahead even if you sell some from time to time.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
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Re: Is it possible that the market takes more than a decade to recover?
2000-2013
1966-1981
1929-1943
In these windows, from beginning to end, an investor trailed one-month T Bills over the duration in the SP500. From 2000-2009 window, the investor had negative nominal returns, let along real. A truly bad window.
I use the term "window" with purpose, as moving the start year even 1 or 2 years changes the outcome in each window, sometimes immensely. But as far as, have we seen decade's long periods of negative returns (both real and nominal)? Yes, we have.
1966-1981
1929-1943
In these windows, from beginning to end, an investor trailed one-month T Bills over the duration in the SP500. From 2000-2009 window, the investor had negative nominal returns, let along real. A truly bad window.
I use the term "window" with purpose, as moving the start year even 1 or 2 years changes the outcome in each window, sometimes immensely. But as far as, have we seen decade's long periods of negative returns (both real and nominal)? Yes, we have.
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Re: Is it possible that the market takes more than a decade to recover?
Europe historically has much higher dividends... despite being flat, (and yes, it's a coiled spring), someone DRIPPING would have nice returns after 20 years.homebuyer6426 wrote: ↑Tue May 24, 2022 7:48 amCheck out Europe:Morik wrote: ↑Sun May 22, 2022 10:49 pm Of course there is a possibility the market could take more than 10 years to recover.
There is a possibility the market could go down a whole lot and stay down for a long time.
This is part of the risk of investing in equities.
Is it very likely? I don't think it is very likely--we have seen this happen with the Japanese market, but as far as I'm aware that is the only example that is spoken of regularly.
If this were a very likely thing, I would think we'd have seen it happen more often.
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Re: Is it possible that the market takes more than a decade to recover?
Its possible. I don't think the Japan example is useful for comparison purposes to the US economy because is different market with different government policy etc. Also I would say the US historical data from pre-WWII era is so far in the past that's its not that relevant for today's economy. But as other noted, it has happened in the US post WWII.
Investors would shift to value stocks, dividend stocks. For example boring but reliable vanguard utilities index fund can actually outperform some of the so called actively managed "balanced" funds over 10 years.
Investors would shift to value stocks, dividend stocks. For example boring but reliable vanguard utilities index fund can actually outperform some of the so called actively managed "balanced" funds over 10 years.
Re: Is it possible that the market takes more than a decade to recover?
I see a 1.53% real CAGR for the 20 years from 2000 to the end of 2019.princetontiger wrote: ↑Tue May 24, 2022 9:33 amEurope historically has much higher dividends... despite being flat, (and yes, it's a coiled spring), someone DRIPPING would have nice returns after 20 years.homebuyer6426 wrote: ↑Tue May 24, 2022 7:48 amCheck out Europe:Morik wrote: ↑Sun May 22, 2022 10:49 pm Of course there is a possibility the market could take more than 10 years to recover.
There is a possibility the market could go down a whole lot and stay down for a long time.
This is part of the risk of investing in equities.
Is it very likely? I don't think it is very likely--we have seen this happen with the Japanese market, but as far as I'm aware that is the only example that is spoken of regularly.
If this were a very likely thing, I would think we'd have seen it happen more often.
Re: Is it possible that the market takes more than a decade to recover?
Certainly possible, look at Japan, it's been 30 years since ATH. Some of the European markets are almost where they were in 2000. Unfortunately, a bear market is often when people realize what allocation allow them sleep at night.halivingston wrote: ↑Sun May 22, 2022 10:41 pm I'm 100% invested (3 months expenses in t-bills) in VTI. The decline has been painful, primarily because 2021 was my highest earning year and I put in as much as I can.
Is there a possibility that the market takes more than 10 years to recover?
I say 10 years because, it is a long enough time horizon that my family situation will have changed, and I will need something out of my investments, but also that markets can decline for extended periods of time.
I ask this question because perhaps, being 100% invested has been foolish and I should've kept some dry powder that I could have deployed, perhaps something in BND, but I didn't, my bad.
Due to the nature of my accounts, I'm unable to take shorts or be reverse the market to protect capital.
Re: Is it possible that the market takes more than a decade to recover?
everything is possible with paper assets , but if you keep buying all the way down you will emerge as winner after few years .
Thanks!
Re: Is it possible that the market takes more than a decade to recover?
I think what is interesting is what happens after the period of 10 years of 0 return. You get roaring stock market returns from that low point. So as long as there is some kind of mean reversion, most people will take it.donaldfair71 wrote: ↑Tue May 24, 2022 9:16 am 2000-2013
1966-1981
1929-1943
In these windows, from beginning to end, an investor trailed one-month T Bills over the duration in the SP500. From 2000-2009 window, the investor had negative nominal returns, let along real. A truly bad window.
I use the term "window" with purpose, as moving the start year even 1 or 2 years changes the outcome in each window, sometimes immensely. But as far as, have we seen decade's long periods of negative returns (both real and nominal)? Yes, we have.
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Re: Is it possible that the market takes more than a decade to recover?
guess this is why most experts say 10 years as an investment period is just noise. Just heard Larry Swedroe refer to that on a morningstar interview.withrye wrote: ↑Tue May 24, 2022 8:50 am Someone contributing a constant amount per month starting in January 1999 still had not recouped their initial investment by December 2009, 11 years later. In that example, a regular contribution of $100 each month (adjusted for inflation over time) would be expected to yield a portfolio worth $13,200 after 11 years if there's zero real return. Instead, the market returned a portfolio worth $12,926, or a real loss over 11 years of periodic investing.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
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Re: Is it possible that the market takes more than a decade to recover?
Yeah, good point.revhappy wrote: ↑Tue May 24, 2022 9:50 amI think what is interesting is what happens after the period of 10 years of 0 return. You get roaring stock market returns from that low point. So as long as there is some kind of mean reversion, most people will take it.donaldfair71 wrote: ↑Tue May 24, 2022 9:16 am 2000-2013
1966-1981
1929-1943
In these windows, from beginning to end, an investor trailed one-month T Bills over the duration in the SP500. From 2000-2009 window, the investor had negative nominal returns, let along real. A truly bad window.
I use the term "window" with purpose, as moving the start year even 1 or 2 years changes the outcome in each window, sometimes immensely. But as far as, have we seen decade's long periods of negative returns (both real and nominal)? Yes, we have.
It has historically (stress historically), been true that the best time to invest is among what at the time felt like the worst of times, and vice-versa.
By the way, for folks invested in Developed non-US and Emerging (and I debated not even posting this because allocating to foreign is such a debated topic and I am exhausted by it), it is still one of those "worst of times" moments, and has been for a bit:
Vanguard's Emerging Market Investor Class VEIEX has returned 1.32% for almost 15(!) years.
Vanguard's Developed EX US Investor Class VTMGX has returned 2.28% for almost 15(!) years.
Again, though, change the start time from October 2007 back a few years, or up, and the numbers become more palatable. Still, for the 2007 retiree, only withdrawing, and having a worthwhile allocation to these classes, one must feel like the US investor did by the late 70s.
Re: Is it possible that the market takes more than a decade to recover?
That's a price chart that doesn't include dividends. Never ignore dividends. That's a huge rookie mistake (It's a good way to vet a financial website - if some blogger is making points using charts that don't include dividends, you can safely stop reading that blog).homebuyer6426 wrote: ↑Tue May 24, 2022 7:48 amCheck out Europe:Morik wrote: ↑Sun May 22, 2022 10:49 pm Of course there is a possibility the market could take more than 10 years to recover.
There is a possibility the market could go down a whole lot and stay down for a long time.
This is part of the risk of investing in equities.
Is it very likely? I don't think it is very likely--we have seen this happen with the Japanese market, but as far as I'm aware that is the only example that is spoken of regularly.
If this were a very likely thing, I would think we'd have seen it happen more often.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: Is it possible that the market takes more than a decade to recover?
Why is it giving me a different number? Contributing $100/mo inflation adjusted from January 1999 to December 2009 and putting it in total market comes up as being worth $17,031 when I run portfolio visualizer. CAGR of 142%. Seems like a pretty good return to mewithrye wrote: ↑Tue May 24, 2022 8:50 amSomeone contributing a constant amount per month starting in January 1999 still had not recouped their initial investment by December 2009, 11 years later. In that example, a regular contribution of $100 each month (adjusted for inflation over time) would be expected to yield a portfolio worth $13,200 after 11 years if there's zero real return. Instead, the market returned a portfolio worth $12,926, or a real loss over 11 years of periodic investing.wolf359 wrote: ↑Tue May 24, 2022 7:48 amEven these calculations are based on the assumption that you invested once at the beginning of the period, and never again. Most people don't invest that way. A more typical way of investing is to invest with each paycheck, so that you're contributing a certain amount throughout the entire period.arcticpineapplecorp. wrote: ↑Tue May 24, 2022 7:31 am here's some more info going back to 1928:
https://fourpillarfreedom.com/heres-how ... ince-1928/
During the worst 10-year period (1999-2008), the S&P 500 delivered -3.8% annual returns...
During the worst 20-year period (1929-1948), the S&P 500 delivered 0.6% annual returns...
The S&P 500 never delivered negative annualized returns in any 20-year period.
Play with portfoliovisualizer.com. Go to these bad time periods and plug in your own numbers that reflect the way that you actually invest. You'll likely discover that you actually had positive returns even in this rare market which had a 10-year down market. (Actually, I don't think that tool goes back to 1929, but you can do a 10-year test.)
Make sure you have an adequate emergency fund, and adjust your stock/bond ratio to meet your requirements. If you're 100% equities and you want 70/30 split, just add your new investments to the bond side for now. When you hit your annual rebalance day, rebalance your portfolio to address any remaining issue.
Make sure you write down your investing plan in an investor policy statement. Plan out what you will do if markets turn south. Plan out how you will approach your requirements at the 10-year mark. Then follow your plan.
Re: Is it possible that the market takes more than a decade to recover?
That's the nominal portfolio balance. If you hover over the little info icon next to the Final Balance you can see the inflation-adjusted balance is $12,926.alfaspider wrote: ↑Tue May 24, 2022 2:06 pmWhy is it giving me a different number? Contributing $100/mo inflation adjusted from January 1999 to December 2009 and putting it in total market comes up as being worth $17,031 when I run portfolio visualizer. CAGR of 142%. Seems like a pretty good return to mewithrye wrote: ↑Tue May 24, 2022 8:50 am Someone contributing a constant amount per month starting in January 1999 still had not recouped their initial investment by December 2009, 11 years later. In that example, a regular contribution of $100 each month (adjusted for inflation over time) would be expected to yield a portfolio worth $13,200 after 11 years if there's zero real return. Instead, the market returned a portfolio worth $12,926, or a real loss over 11 years of periodic investing.
Re: Is it possible that the market takes more than a decade to recover?
When you include dividends the return from 2000 to 2019 has been an annualized, real 1.53%. Dividends don't exactly save the portfolio here.HomerJ wrote: ↑Tue May 24, 2022 1:59 pmThat's a price chart that doesn't include dividends. Never ignore dividends. That's a huge rookie mistake (It's a good way to vet a financial website - if some blogger is making points using charts that don't include dividends, you can safely stop reading that blog).homebuyer6426 wrote: ↑Tue May 24, 2022 7:48 amCheck out Europe:Morik wrote: ↑Sun May 22, 2022 10:49 pm Of course there is a possibility the market could take more than 10 years to recover.
There is a possibility the market could go down a whole lot and stay down for a long time.
This is part of the risk of investing in equities.
Is it very likely? I don't think it is very likely--we have seen this happen with the Japanese market, but as far as I'm aware that is the only example that is spoken of regularly.
If this were a very likely thing, I would think we'd have seen it happen more often.
viewtopic.php?p=6693100#p6693100
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Re: Is it possible that the market takes more than a decade to recover?
It's still showing an inflation adjusted CAGR of 136%. It sounds like you may be overcounting inflation by treating every dollar as if it were contributed in 1999 for inflation calculation purposes. The last dollars contributed (late 2008 through 2009) would have actually experienced deflation.withrye wrote: ↑Tue May 24, 2022 2:12 pmThat's the nominal portfolio balance. If you hover over the little info icon next to the Final Balance you can see the inflation-adjusted balance is $12,926.alfaspider wrote: ↑Tue May 24, 2022 2:06 pmWhy is it giving me a different number? Contributing $100/mo inflation adjusted from January 1999 to December 2009 and putting it in total market comes up as being worth $17,031 when I run portfolio visualizer. CAGR of 142%. Seems like a pretty good return to mewithrye wrote: ↑Tue May 24, 2022 8:50 am Someone contributing a constant amount per month starting in January 1999 still had not recouped their initial investment by December 2009, 11 years later. In that example, a regular contribution of $100 each month (adjusted for inflation over time) would be expected to yield a portfolio worth $13,200 after 11 years if there's zero real return. Instead, the market returned a portfolio worth $12,926, or a real loss over 11 years of periodic investing.
Re: Is it possible that the market takes more than a decade to recover?
The CAGR being reported "is calculated from the portfolio start and end balance and is thus impacted by any cashflows."alfaspider wrote: ↑Tue May 24, 2022 2:23 pmIt's still showing an inflation adjusted CAGR of 136%. It sounds like you may be overcounting inflation by treating every dollar as if it were contributed in 2001. The last dollars contributed (late 2008 through 2009) would have actually experienced deflation.withrye wrote: ↑Tue May 24, 2022 2:12 pmThat's the nominal portfolio balance. If you hover over the little info icon next to the Final Balance you can see the inflation-adjusted balance is $12,926.alfaspider wrote: ↑Tue May 24, 2022 2:06 pmWhy is it giving me a different number? Contributing $100/mo inflation adjusted from January 1999 to December 2009 and putting it in total market comes up as being worth $17,031 when I run portfolio visualizer. CAGR of 142%. Seems like a pretty good return to mewithrye wrote: ↑Tue May 24, 2022 8:50 am Someone contributing a constant amount per month starting in January 1999 still had not recouped their initial investment by December 2009, 11 years later. In that example, a regular contribution of $100 each month (adjusted for inflation over time) would be expected to yield a portfolio worth $13,200 after 11 years if there's zero real return. Instead, the market returned a portfolio worth $12,926, or a real loss over 11 years of periodic investing.
You can see that starting with a balance of $100 instead of $1 in Jan 1999 results in a real CAGR of 55.68%. Clearly you didn't cut your annual return by nearly two-thirds when starting with $99 additional dollars in 1999.
Put another way, it's calculating the annualized growth of $1 into $12,926 dollars. Backcalculating the growth, we take (12926/1)^(1/11) and get a result of 2.3647. Subtract 1 and multiply by 100% to get a result of 136.47%, or exactly the inflation-adjusted CAGR reported by PortfolioVisualizer.
Put yet another way, CAGR as reported by PV is incredibly sensitive to initial portfolio value when there are periodic cashflows over a long period of time.
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Re: Is it possible that the market takes more than a decade to recover?
I'm blushing. I just checked a european mutual fund and get 2%, close to your figure. I still can't believe that, despite the reinvestment. But, hey, that's why there is VT! I wonder if we see a reversal this decade.withrye wrote: ↑Tue May 24, 2022 9:42 amI see a 1.53% real CAGR for the 20 years from 2000 to the end of 2019.princetontiger wrote: ↑Tue May 24, 2022 9:33 amEurope historically has much higher dividends... despite being flat, (and yes, it's a coiled spring), someone DRIPPING would have nice returns after 20 years.homebuyer6426 wrote: ↑Tue May 24, 2022 7:48 amCheck out Europe:Morik wrote: ↑Sun May 22, 2022 10:49 pm Of course there is a possibility the market could take more than 10 years to recover.
There is a possibility the market could go down a whole lot and stay down for a long time.
This is part of the risk of investing in equities.
Is it very likely? I don't think it is very likely--we have seen this happen with the Japanese market, but as far as I'm aware that is the only example that is spoken of regularly.
If this were a very likely thing, I would think we'd have seen it happen more often.
Higher commodity prices should make international better... however, the dollar has gotten stronger not weaker.
Tough to predict markets. Just when I think that I've seen almost every single permutation, bam! A new scenario forms.
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Re: Is it possible that the market takes more than a decade to recover?
We discussed yesterday, but I don't think PE is as reliable as you might think. For example, if PE is so reliable then international should be beating US year in and year out, but we don't see that happening (though 2022 might be).Tamalak wrote: ↑Mon May 23, 2022 12:05 pm Interesting.. a bond's "investment horizon" is the term of the bond - the point at which you're definitely going to get your money back plus the underlying returns unless disaster strikes. You could say that a stock's "horizon" in years is the PE of the stock - albeit, with a greater chance of disaster.
Has there ever been a period where you haven't made at least 0% real returns after x years, where x is the PE at the start year? I don't think so. In fact I wonder what % real gain above 0% you can plug in before you find a starting year that fails.
I'm not trying to start ex-US vs US, but just pointing out that the markets do not necessarily unfold according to valuations.
Re: Is it possible that the market takes more than a decade to recover?
Oh it saves it quite a bit... That chart also doesn't show inflation. What were the nominal returns from 2000-2019?withrye wrote: ↑Tue May 24, 2022 2:13 pmWhen you include dividends the return from 2000 to 2019 has been an annualized, real 1.53%. Dividends don't exactly save the portfolio here.HomerJ wrote: ↑Tue May 24, 2022 1:59 pmThat's a price chart that doesn't include dividends. Never ignore dividends. That's a huge rookie mistake (It's a good way to vet a financial website - if some blogger is making points using charts that don't include dividends, you can safely stop reading that blog).homebuyer6426 wrote: ↑Tue May 24, 2022 7:48 amCheck out Europe:Morik wrote: ↑Sun May 22, 2022 10:49 pm Of course there is a possibility the market could take more than 10 years to recover.
There is a possibility the market could go down a whole lot and stay down for a long time.
This is part of the risk of investing in equities.
Is it very likely? I don't think it is very likely--we have seen this happen with the Japanese market, but as far as I'm aware that is the only example that is spoken of regularly.
If this were a very likely thing, I would think we'd have seen it happen more often.
viewtopic.php?p=6693100#p6693100
That chart shows a top of around 5400 and 3700 today... so a drop of 30% nominal, when in fact your returns were positive even in real terms and higher in nominal terms.
If we guess 3%-4% gains per year nominal, that's like a 80%- 110% nominal gain over 20 years instead of a 30% nominal loss like that chart shows.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: Is it possible that the market takes more than a decade to recover?
I did not post the original chart and I make no claims supporting it. I don't know the original poster's intent for the chart. I do not know where the chart ends (2020? 2021? 2022?) nor do I know why the chart's x-axis does not have even intervals (i.e. jumps from 2000 inexplicably to 2006 when other intervals are in multiples of 5).HomerJ wrote: ↑Tue May 24, 2022 2:38 pmOh it saves it quite a bit... That chart also doesn't show inflation. What were the nominal returns from 2000-2019?withrye wrote: ↑Tue May 24, 2022 2:13 pmWhen you include dividends the return from 2000 to 2019 has been an annualized, real 1.53%. Dividends don't exactly save the portfolio here.HomerJ wrote: ↑Tue May 24, 2022 1:59 pm That's a price chart that doesn't include dividends. Never ignore dividends. That's a huge rookie mistake (It's a good way to vet a financial website - if some blogger is making points using charts that don't include dividends, you can safely stop reading that blog).
viewtopic.php?p=6693100#p6693100
That chart shows a top of around 5400 and 3700 today... so a drop of 30% nominal, when in fact your returns were positive even in real terms and higher in nominal terms.
If we guess 3%-4% gains per year nominal, that's like a 80%- 110% nominal gain over 20 years instead of a 30% nominal loss like that chart shows.
What I do know is that in the 20-year period from 2000 to the end of 2019, the European markets had a real return of around 1.5%. We can get into a discussion about official vs "personal" rates of inflation, but I do not think that will be instructive. I believe the fairest, most interpretable, and most generalizable comparator when discussing historical returns is real returns adjusted for official inflation.
In that light, European markets returned an annualized, real 1.5% over a 20-year span after reinvestment of dividends. I leave it to the reader to determine whether that is a good or bad thing.
Re: Is it possible that the market takes more than a decade to recover?
We were discussing the chart. So apples-to-apples comparison is important.withrye wrote: ↑Tue May 24, 2022 2:57 pmI did not post the original chart and I make no claims supporting it. I don't know the original poster's intent for the chart. I do not know where the chart ends (2020? 2021? 2022?) nor do I know why the chart's x-axis does not have even intervals (i.e. jumps from 2000 inexplicably to 2006 when other intervals are in multiples of 5).HomerJ wrote: ↑Tue May 24, 2022 2:38 pmOh it saves it quite a bit... That chart also doesn't show inflation. What were the nominal returns from 2000-2019?withrye wrote: ↑Tue May 24, 2022 2:13 pmWhen you include dividends the return from 2000 to 2019 has been an annualized, real 1.53%. Dividends don't exactly save the portfolio here.HomerJ wrote: ↑Tue May 24, 2022 1:59 pm That's a price chart that doesn't include dividends. Never ignore dividends. That's a huge rookie mistake (It's a good way to vet a financial website - if some blogger is making points using charts that don't include dividends, you can safely stop reading that blog).
viewtopic.php?p=6693100#p6693100
That chart shows a top of around 5400 and 3700 today... so a drop of 30% nominal, when in fact your returns were positive even in real terms and higher in nominal terms.
If we guess 3%-4% gains per year nominal, that's like a 80%- 110% nominal gain over 20 years instead of a 30% nominal loss like that chart shows.
What I do know is that in the 20-year period from 2000 to the end of 2019, the European markets had a real return of around 1.5%. We can get into a discussion about official vs "personal" rates of inflation, but I do not think that will be instructive. I believe the fairest, most interpretable, and most generalizable comparator when discussing historical returns is real returns adjusted for official inflation.
In that light, European markets returned an annualized, real 1.5% over a 20-year span after reinvestment of dividends. I leave it to the reader to determine whether that is a good or bad thing.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: Is it possible that the market takes more than a decade to recover?
I'm optimistic. I believe the market today can better adapt to new environments like in the past.halivingston wrote: ↑Sun May 22, 2022 10:41 pm Is there a possibility that the market takes more than 10 years to recover?
In the past there were a lot more industrial companies in the total stock market, which are more vulnerable to inflation:
https://www.qad.com/blog/2019/10/sp-500 ... -over-time
In this articles are also some good reasons, why today the market is different than 1970s:
https://www.blackrock.com/us/individual ... -the-1970s
https://www.spenceandpartners.co.uk/ins ... e-economy/
Re: Is it possible that the market takes more than a decade to recover?
This is a misunderstanding between us then.HomerJ wrote: ↑Tue May 24, 2022 3:05 pmWe were discussing the chart. So apples-to-apples comparison is important.withrye wrote: ↑Tue May 24, 2022 2:57 pmI did not post the original chart and I make no claims supporting it. I don't know the original poster's intent for the chart. I do not know where the chart ends (2020? 2021? 2022?) nor do I know why the chart's x-axis does not have even intervals (i.e. jumps from 2000 inexplicably to 2006 when other intervals are in multiples of 5).HomerJ wrote: ↑Tue May 24, 2022 2:38 pmOh it saves it quite a bit... That chart also doesn't show inflation. What were the nominal returns from 2000-2019?withrye wrote: ↑Tue May 24, 2022 2:13 pmWhen you include dividends the return from 2000 to 2019 has been an annualized, real 1.53%. Dividends don't exactly save the portfolio here.HomerJ wrote: ↑Tue May 24, 2022 1:59 pm That's a price chart that doesn't include dividends. Never ignore dividends. That's a huge rookie mistake (It's a good way to vet a financial website - if some blogger is making points using charts that don't include dividends, you can safely stop reading that blog).
viewtopic.php?p=6693100#p6693100
That chart shows a top of around 5400 and 3700 today... so a drop of 30% nominal, when in fact your returns were positive even in real terms and higher in nominal terms.
If we guess 3%-4% gains per year nominal, that's like a 80%- 110% nominal gain over 20 years instead of a 30% nominal loss like that chart shows.
What I do know is that in the 20-year period from 2000 to the end of 2019, the European markets had a real return of around 1.5%. We can get into a discussion about official vs "personal" rates of inflation, but I do not think that will be instructive. I believe the fairest, most interpretable, and most generalizable comparator when discussing historical returns is real returns adjusted for official inflation.
In that light, European markets returned an annualized, real 1.5% over a 20-year span after reinvestment of dividends. I leave it to the reader to determine whether that is a good or bad thing.
You responded directly to the chart, noting its failings regarding lack of inflation correction and reinvested dividends. I responded to (what I viewed as) the spirit of your response, which is that if we correct for the failings of the chart, the return of European markets has not been so bad. Forgive me if I read too much into your critique or its implied assumption.
Re: Is it possible that the market takes more than a decade to recover?
The nominal return for European equities from Dec 2000 to Apr 2022, with dividends reinvested, has been 4.39% annualized (source here). And during the same period the average annual inflation here in Europe has been 2%.HomerJ wrote: ↑Tue May 24, 2022 2:38 pm Oh it saves it quite a bit... That chart also doesn't show inflation. What were the nominal returns from 2000-2019?
That chart shows a top of around 5400 and 3700 today... so a drop of 30% nominal, when in fact your returns were positive even in real terms and higher in nominal terms.
If we guess 3%-4% gains per year nominal, that's like a 80%- 110% nominal gain over 20 years instead of a 30% nominal loss like that chart shows.
Last edited by tobyy on Tue May 24, 2022 3:37 pm, edited 1 time in total.
Re: Is it possible that the market takes more than a decade to recover?
He gives a lot of interviews, but generally, that kind of forecast usually intends to convey that returns on stocks will be lower in the future than returns on stocks have been in the past; not necessarily that the stock market is going to go into a dive and never come back. So a future in which stocks only returned an average 3% or 4% a year instead of 7% or 8% a year would probably be in accord with El-Arian’s outlook. If I understand OP’s concern correctly, it’s whether we could face a sustained slide in stock prices and then years bumping along the bottom without a meaningful recovery, leaving buy-and-hold investors with essentially permanent (or at any rate very long-term) losses.halivingston wrote: ↑Sun May 22, 2022 11:23 pm El-Erian comes on CNBC and keeps saying the liquidity is going away and regime change in interest rate means low stocks for years to come.
Re: Is it possible that the market takes more than a decade to recover?
TLDR
OP, you have ten years to save towards when you do need more money. Start now, and if the market recovers sooner, sell some then to complete your buffer of cash for your future expenses.
OP, you have ten years to save towards when you do need more money. Start now, and if the market recovers sooner, sell some then to complete your buffer of cash for your future expenses.
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Re: Is it possible that the market takes more than a decade to recover?
It will be a good 10 years opportunity to DCA and roth conversion.
Re: Is it possible that the market takes more than a decade to recover?
Didn't even read your post. . .yes, anything is possible
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A time to EVALUATE your jitters https://www.bogleheads.org/forum/viewtopic.php?p=1139732#p1139732