20 Years for SP500 to Recover

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Logan Roy
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Re: 20 Years for SP500 to Recover

Post by Logan Roy »

withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
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That is surprising.

In light of the Emerging Mkts discussion here recently, I tried it with US stocks vs EM, and even over this period (limited by PV's EM data, to 1995) in which EM didn't outperform US stocks, regular contributions into EM here at least produced a positive overall result, with 100% US Stocks at $127,000, and contributions (I think) $168,000. Adding a small hedge (20% gold) also improved things. But it could be a lesson in buying cheap. Buying US stocks into the tech boom was generally expensive.

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burritoLover
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Re: 20 Years for SP500 to Recover

Post by burritoLover »

withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
Source
Sure it's demoralizing for 100% stock portfolio but pretty meaningless - they should have known a 50% drop was possible. If they didn't, that is their own fault. Should have picked up a clue after the dot com bust anyway.
visualguy
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Re: 20 Years for SP500 to Recover

Post by visualguy »

withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
Source
Sobering example, and exactly the reason to diversify to real estate in a good location (for those who can pull that off).
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nisiprius
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Re: 20 Years for SP500 to Recover

Post by nisiprius »

firebirdparts wrote: Wed Aug 10, 2022 10:37 am The argument for 2000-2013 is a a bit ugly as well. Many, many times, people will say "the market was basically flat blah blah blah" and how anybody who was born at the time can say that is beyond me.

It's technically true that the high was not achieved in 2008, but it's very close. You're throwing a set of brackets around two very important events there, that coincidentally are spaced almost perfectly to allow a recovery from the first one. To me, that's more interesting than trying to say it was "flat" or more to the point a 13 year recovery. It was obviously two recoveries.

The reason I say "interesting" is that none of this has any fundamental meaning. People who argue about "the stock market always does this" are really just making cocktail party conversations. Fundamentally, the stock market is composed of a billion people trading based on their own opinions about basically everything, in a world that is hurtling through space while all sorts of things happen.
Yes, but it sort of cancels out because 2000-2013 and 1929-1944 are both hair-thin close calls. If they weren't one long decline, then they were two back-to-back medium-long decline. As it happens, Morningstar called one one way and the other the other way.

I definitely remember how disheartening it was when the recovery from 2003--whether not quite complete or just barely complete--hit the wall and crashed again. It is one of the reasons 2008-2009 was so psychologically devastating.
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CyclingDuo
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Re: 20 Years for SP500 to Recover

Post by CyclingDuo »

withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
Source
This discussion lines up pretty well with the Retireby40.org blog that also begins maxing out a 401K around 1988/89 (for that graduate you mention).

Although IRS maximum contributions in 1988 and 1999 did not allow for $1000 a month contribution, as a $1000 a month was not allowed until 2003 and beyond. Regardless, that graduate after 20 years of working in 2009 was age 42-44 and provided they remained employed, they were taking advantage of being able to buy stocks each and every month through the two bear markets in the 2000-2009 period. Skip ahead to 2022 where they have now been working and saving for 34 years, are now age 56-58 at this point and still maxing out their 401k's.

The following graphic shows up to year end 2021 so one gets the picture of the benefit of investing year in and year out throughout the secular cycles in the index fund...

https://retireby40.org/what-if-always-maxed-401k/

Image

Amounts shown above do not include the employer match or any catch up contributions.

By the end of our 1988/89 start and subsequent typical 40 year working career, we shall see what another 6 years of contributions and the end result ends up being.

Nick Maggiullli sums up some thoughts about the secular cycles very well here regarding the luck of the draw of the 40 year work period and where it falls regarding markets.

https://ofdollarsanddata.com/realistic- ... t-results/

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
McQ
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Re: 20 Years for SP500 to Recover

Post by McQ »

Here are a few additional data points to support the OP, which I will gloss as: "stocks can go down and stay down for longer than you might like." Doesn't mean you shouldn't invest; it simply means that stocks remain a risk asset over any time horizon, long as well as short.

Here are some pre-1871 data on what I call doldrums, decade+ periods where stocks returns less than 1.00% real annualized. These are January to January annual only, so the post 1871 results don't precisely align with the OP.

Image

And here are some worst cases including longer rolls.

Image

Source: https://papers.ssrn.com/sol3/papers.cfm ... id=3805927

I have UK data back to the 1700s from GFD; I'll try a similar analysis of worst cases in a bit.
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
Count of Notre Dame
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Re: 20 Years for SP500 to Recover

Post by Count of Notre Dame »

withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
Source
I backtested this in PV, and got dramatically different results (~$678k ending value) using VFINX and $1k per month inflation adjusted contributions. What am I doing wrong? Just trying to understand PV a little better, not challenging your data.
tvubpwcisla
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Re: 20 Years for SP500 to Recover

Post by tvubpwcisla »

If your withdrawal rate = the dividend yield of the S&P 500 Index Fund, it doesn't need to recover at all; whether it is 20 years, 30 years, or 100 years.

What is more important than the length of time to for an Index Fund to recover is that you keep your expenses low.

:moneybag
Zeno
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Re: 20 Years for SP500 to Recover

Post by Zeno »

tvubpwcisla wrote: Wed Aug 10, 2022 10:15 pm If your withdrawal rate = the dividend yield of the S&P 500 Index Fund, it doesn't need to recover at all; whether it is 20 years, 30 years, or 100 years.

What is more important than the length of time to for an Index Fund to recover is that you keep your expenses low.

:moneybag
+1

Your post will trigger the chorus of those arguing that dividends are part of total return. Thus, dividends are part of the withdrawal rate. All of that is true. Dividends aren’t magical, nor are they free money.

Still, when I retire, the first thing I am going to do is log onto VG, turn off auto-invest of dividends, then direct those returns to our checking account instead. And if we can live off that, that will be totally cool.

Keep it simple.
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CraigTester
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

McQ wrote: Wed Aug 10, 2022 10:04 pm Here are a few additional data points to support the OP, which I will gloss as: "stocks can go down and stay down for longer than you might like." Doesn't mean you shouldn't invest; it simply means that stocks remain a risk asset over any time horizon, long as well as short.

Here are some pre-1871 data on what I call doldrums, decade+ periods where stocks returns less than 1.00% real annualized. These are January to January annual only, so the post 1871 results don't precisely align with the OP.

Image

And here are some worst cases including longer rolls.

Image

Source: https://papers.ssrn.com/sol3/papers.cfm ... id=3805927

I have UK data back to the 1700s from GFD; I'll try a similar analysis of worst cases in a bit.
Thank you for the assist, Professor!

Just skimmed/enjoyed your article (will read more thoroughly later)...

Loved the line, "Few questioned Siegel’s data series because the story these told was so reassuring"

You could sum up this thread with a slight modification to this same sentence....

Just replace the words "Siegel's data series" with "The NYT's version of the Great Depression Recovery"

All the Best,

Craig Tester
mffl
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Re: 20 Years for SP500 to Recover

Post by mffl »

MarkRoulo wrote: Tue Aug 09, 2022 3:52 pm
burritoLover wrote: Tue Aug 09, 2022 2:43 pm
CraigTester wrote: Tue Aug 09, 2022 2:38 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
I've seen the 4 1/2 year recovery for a broad-based diversified basket of stocks (not DOW) for the great depression mentioned in numerous places considering deflation. Don't know the methodology used there.
4 1/2 years to recover from a nominal 89% drop in stocks is going to be tough.

I expect that by
  • Picking a start date a little carefully (e.g. don't pick the peak in 1929, pick either Jan 1 or Dec 31 or Jan-1 1930)
  • Having some leeway about which stocks you pick, and
  • Not getting too hung up on exactly 4 1/2 years (maybe 5 years and a bit)
You can find a way to get this 4 1/2 year recovery for the Great Depression.

Some examples (none of which get us a 4 1/2 year recovery).
  • Aug 1929 - Feb 1934 has an inflation/deflation adjusted total return (so including dividends) of -35%. Not quite a recovery.
  • Aug 1929 - Feb 1937, however, has an inflation/deflation adjusted total return of +11% so we've recovered. This was close to a local top, however, and
  • Aug 1929 - Feb 1940 was back to an inflation/deflation adjusted total return of -11%
January 1930 - January 1936 shows an 11% inflation/deflation adjusted total return so we're getting close. This is six years. Maybe choosing a different series of stock returns will get your 4 1/2 year. I'm using data from here: https://dqydj.com/sp-500-return-calculator/

I'm sure there are other data sets.
I think the 4 1/2 year recovery thing was not peak to trough to recovery, it's just trough to recovery. Obviously way different than what we're talking about here. I think this originally came from a NYT article. https://www.nytimes.com/2009/04/26/your ... 6stra.html

Though as others have mentioned, even peak to trough to recovery was only about 7 years inflation (deflation) adjusted, not 20 or 25 or whatever. The 70s actually look scarier by this metric, as well as 2000-2013 or so.

I think OP has a salient point that we're getting a little addicted to lightning fast recoveries (2018, 2020, and even 2022 is already starting to claw its way back), and we should assume the market will come back but not always in 8 months peak to recovery every time and select an appropriate AA accordingly. Caveat investor.

But on the other hand, what's the story, Bob the unlucky investor, who kept investing at all the market peaks over the last 30 years or whatever it was? Still came out way ahead. So, for anyone more than 8-10 years out from retirement, this is just noise. Maybe even 5 years out, as DCA at lower valuations is golden. Also, I don't need a collapse to recover completely. Getting back within 20% or certainly 10% of the previous peak in question (at which point I most certainly didn't lump sum in my entire life savings) is probably not going to destroy my retirement. I wonder what the time windows here are if you'll accept minus 15% and you're still saving 10% to 20% of your annual income. If you don't have that going for you, then yeah, you'd better have some bonds and, erm, hope 2022 doesn't happen again.
Marseille07
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

tvubpwcisla wrote: Wed Aug 10, 2022 10:15 pm If your withdrawal rate = the dividend yield of the S&P 500 Index Fund, it doesn't need to recover at all; whether it is 20 years, 30 years, or 100 years.

What is more important than the length of time to for an Index Fund to recover is that you keep your expenses low.

:moneybag
Buddy, we've gone over this. There isn't anything special about dividend yield, and I'd argue setting WR% = dividend yield is actually harmful.

Keeping expenses low is good. At the end of the day, the math is really simple - the less you withdraw, the better for longevity of your portfolio.
Topic Author
CraigTester
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

Marseille07 wrote: Wed Aug 10, 2022 11:03 pm
tvubpwcisla wrote: Wed Aug 10, 2022 10:15 pm If your withdrawal rate = the dividend yield of the S&P 500 Index Fund, it doesn't need to recover at all; whether it is 20 years, 30 years, or 100 years.

What is more important than the length of time to for an Index Fund to recover is that you keep your expenses low.

:moneybag
Buddy, we've gone over this. There isn't anything special about dividend yield, and I'd argue setting WR% = dividend yield is actually harmful.

Keeping expenses low is good. At the end of the day, the math is really simple - the less you withdraw, the better for longevity of your portfolio.
Perhaps also relevant to this exchange is that dividends tend to fall during tough patches in the market.

By my quick calculations, during the four time periods discussed in my OP, dividends fell 33%, 33%, 20% and 38% respectively.
Marseille07
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

CraigTester wrote: Wed Aug 10, 2022 11:16 pm Perhaps also relevant to this exchange is that dividends tend to fall during tough patches in the market.

By my quick calculations, during the four time periods discussed in my OP, dividends fell 33%, 33%, 20% and 38% respectively.
Yes, this is why I said it is harmful to tie your WR% to dividend yields. it's much better to just pick something low and stick with it.
withrye
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Re: 20 Years for SP500 to Recover

Post by withrye »

Count of Notre Dame wrote: Wed Aug 10, 2022 10:08 pm
withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
Source
I backtested this in PV, and got dramatically different results (~$678k ending value) using VFINX and $1k per month inflation adjusted contributions. What am I doing wrong? Just trying to understand PV a little better, not challenging your data.
The quickest way to diagnose this would be for you to share the URL that results in PV after tapping the "Link" button below "Portfolio Analysis Results" midway down the page. As with my linked source above, it will allow anyone to see the precise inputs to the calculator.
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dogagility
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Re: 20 Years for SP500 to Recover

Post by dogagility »

Count of Notre Dame wrote: Wed Aug 10, 2022 10:08 pm
withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
Source
I backtested this in PV, and got dramatically different results (~$678k ending value) using VFINX and $1k per month inflation adjusted contributions. What am I doing wrong? Just trying to understand PV a little better, not challenging your data.
I suspect you're not cherry-picking the same end date (Feb 2009) and perhaps not inflation-adjusting the portfolio value. Cherry-picking is a great way to torture data until it confesses! :D
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alluringreality
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Re: 20 Years for SP500 to Recover

Post by alluringreality »

Count of Notre Dame wrote: Wed Aug 10, 2022 10:08 pm I backtested this in PV, and got dramatically different results (~$678k ending value) using VFINX and $1k per month inflation adjusted contributions. What am I doing wrong? Just trying to understand PV a little better, not challenging your data.
As noted by dogagility, I'd guess your ending month doesn't match. The value increased fairly rapidly between February and December of 2009. Here is the same setup using VFINX. Under final balance, if you hover over the black circle with "i" it will indicate the inflation adjusted balance. Inflation adjusted values can also be viewed by checkmarking the "Inflation adjusted" option for the Portfolio Growth graph.
https://www.portfoliovisualizer.com/bac ... ion1_1=100
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CyclingDuo
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Re: 20 Years for SP500 to Recover

Post by CyclingDuo »

On August 8, 2018 in your initial post after joining Bogleheads, we find that even 4 years ago you were hashing out much of the same subject as this thread does regarding valuations and the big wait to invest when you wrote:
CraigTester wrote: Tue Aug 09, 2022 1:55 pm And I've yet to hear a compelling argument why anyone would possibly invest in the SP500 at today's valuation level
Craig Tester
- viewtopic.php?t=255972

We found it compelling to continue to invest in the S&P 500 at the valuation levels on August 8, 2018 with our regular bi-weekly contributions from paychecks. In fact, I was quickly maxing out my 403b + catch up contributions to capitalize on the remaining salary I had coming from a job that I had lost a few months earlier (academia pays until the end of the annual contract, which in my case was the final day in August), plus I was investing all of my unemployment checks thanks to my spouse's income being able to cover all of our household expenses while I searched for new employment. So yes - we found it compelling at the time.

:sharebeer

Compelling argument? That all depends on your interpretation of the return to date on an August 8th, 2018 investment. Yes, there were a couple of excellent entry points that were a bit more compelling total return wise (a few months after your post as well as the lows on March 23, 2020), however that would point more to lump sum/market timing than those of us who are the B&H, invest throughout your 35-40 year working career advocates. I haven't combed through your subsequent posts enough to know if you were or were not taking advantage of those entry points - or if you felt, based on CAPE, that the argument was still not compelling enough to lure your investment money into the S&P 500.

S&P 500 (SPY) at the August 8, 2018 price to yesterday's price has an annualized return of 12.01%.

Image

The return for August 8/2018 to yesterday's close is represented in VOO here...

Image

CyclingDuo
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1moreyr
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Re: 20 Years for SP500 to Recover

Post by 1moreyr »

CyclingDuo wrote: Thu Aug 11, 2022 8:48 am On August 8, 2018 in your initial post after joining Bogleheads, we find that even 4 years ago you were hashing out much of the same subject as this thread does regarding valuations and the big wait to invest when you wrote:
CraigTester wrote: Tue Aug 09, 2022 1:55 pm And I've yet to hear a compelling argument why anyone would possibly invest in the SP500 at today's valuation level
Craig Tester
- viewtopic.php?t=255972

We found it compelling to continue to invest in the S&P 500 at the valuation levels on August 8, 2018 with our regular bi-weekly contributions from paychecks. In fact, I was quickly maxing out my 403b + catch up contributions to capitalize on the remaining salary I had coming from a job that I had lost a few months earlier (academia pays until the end of the annual contract, which in my case was the final day in August), plus I was investing all of my unemployment checks thanks to my spouse's income being able to cover all of our household expenses while I searched for new employment. So yes - we found it compelling at the time.

:sharebeer

Compelling argument? That all depends on your interpretation of the return to date on an August 8th, 2018 investment. Yes, there were a couple of excellent entry points that were a bit more compelling total return wise (a few months after your post as well as the lows on March 23, 2020), however that would point more to lump sum/market timing than those of us who are the B&H, invest throughout your 35-40 year working career advocates. I haven't combed through your subsequent posts enough to know if you were or were not taking advantage of those entry points - or if you felt, based on CAPE, that the argument was still not compelling enough to lure your investment money into the S&P 500.

S&P 500 (SPY) at the August 8, 2018 price to yesterday's price has an annualized return of 12.01%.

Image

The return for August 8/2018 to yesterday's close is represented in VOO here...

Image

CyclingDuo
oh that's rich..... thanks for the chucle
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burritoLover
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Re: 20 Years for SP500 to Recover

Post by burritoLover »

I was talking markets/inflation with a co-worker and I said "yeah, but on a real basis" and they looked at me like I had tentacles growing out of my head. All the average person understands is nominal returns - their account was $100k at the beginning of the year and now its $85k. There are plenty of scary examples even on a nominal basis.

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alluringreality
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Re: 20 Years for SP500 to Recover

Post by alluringreality »

CyclingDuo wrote: Thu Aug 11, 2022 8:48 am S&P 500 (SPY) at the August 8, 2018 price to yesterday's price has an annualized return of 12.01%.
For consistency with the original post, the real return would be lower. It looks like the total gain for SPY or VOO was roughly 33% to the end of July, while international stocks declined in real terms. Hopefully people investing in stocks understand that a 33% real increase could easily be challenged in the future. Personally I think for my situation it has made sense to invest in stocks for longer than the past four years, but other people's situations are different. I don't really care how other people choose to invest, and in the 2020 decline it was clear enough that some forum comments were essentially taking the other side of my buying. Ultimately I figure value investors generally need to expect to underperform the market for very considerable periods, probably at least a decade or more.
https://www.portfoliovisualizer.com/bac ... ion3_3=100

In some respects, I tend to question if quick stock recovery sentiment might be a bit optimistic. For example stock marketing materials tend to focus on the short length of bear markets in relation to bull markets. It's fairly uncommon for stock marketing materials to give solid numbers for how long it has taken historically for previous declines to recover, either in nominal or real terms. I'm not convinced the number of months for recovery on page 6 in the following accounts for reinvesting dividends, yet I haven't been able to track down many financial services companies publishing similar information regarding historical underwater stock periods.
https://www.goldmansachs.com/insights/p ... ntials.pdf
45% US Indexes, 25% Ex-US Indexes, 30% Fixed Income - Buy & Hold
MarkRoulo
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Re: 20 Years for SP500 to Recover

Post by MarkRoulo »

mffl wrote: Wed Aug 10, 2022 11:03 pm ... snip ...

I think the 4 1/2 year recovery thing was not peak to trough to recovery, it's just trough to recovery. Obviously way different than what we're talking about here. I think this originally came from a NYT article. https://www.nytimes.com/2009/04/26/your ... 6stra.html

Though as others have mentioned, even peak to trough to recovery was only about 7 years inflation (deflation) adjusted, not 20 or 25 or whatever. The 70s actually look scarier by this metric, as well as 2000-2013 or so.

I think OP has a salient point that we're getting a little addicted to lightning fast recoveries (2018, 2020, and even 2022 is already starting to claw its way back), and we should assume the market will come back but not always in 8 months peak to recovery every time and select an appropriate AA accordingly. Caveat investor.

But on the other hand, what's the story, Bob the unlucky investor, who kept investing at all the market peaks over the last 30 years or whatever it was? Still came out way ahead. So, for anyone more than 8-10 years out from retirement, this is just noise. Maybe even 5 years out, as DCA at lower valuations is golden. Also, I don't need a collapse to recover completely. Getting back within 20% or certainly 10% of the previous peak in question (at which point I most certainly didn't lump sum in my entire life savings) is probably not going to destroy my retirement. I wonder what the time windows here are if you'll accept minus 15% and you're still saving 10% to 20% of your annual income. If you don't have that going for you, then yeah, you'd better have some bonds and, erm, hope 2022 doesn't happen again.
Yeah, the "4 1/2 year recovery" was what you said. The first two paragraphs of your NYT link
HISTORICAL stock charts seem to show that it took more than 25 years for the market to recover from the 1929 crash — a dismal statistic that has been brought to investors’ attention many times in the current downturn.

But a careful analysis of the record shows that the picture is more complex and, ultimately, far less daunting: An investor who invested a lump sum in the average stock at the market’s 1929 high would have been back to a break-even by late 1936, less than four and a half years after the mid-1932 market low.
So we have several ways to describe the same thing (and all are "correct"):
  • Mark Hulbert: After the stock market crashed about 70% in real terms over about 2 1/2 years, the GDP dropped about 30% and the US saw 25% unemployment it then took the stock market only 4 1/2 years to recover the losses (in real terms and taking dividends into account)
  • Peak-to-peak: So a total of about seven years peak-to-peak
  • "Permanent high": Except that after the recovery at the seven year mark the stock market crashed AGAIN, recovered by 1945 (now 16 years after the peak), dropped AGAIN in 1946 and didn't finally recover the 1929 value (in real terms and accounting for dividends) until around 1950 (about 20 years after the 1929 peak)
I think the 1970s might have been "scarier" except:
  • Just getting back to even in real (not nominal!) terms and then crashing again isn't seen as a recovery by most people (I think). Especially if the economy tanks again along with the stock market.
  • Generally, people think in nominal terms and the 1970s were hurt by inflation much more than the 1930 (which actually saw deflation). The Dow dropped 89% in nominal terms peak-to-trough during the great depression. We never saw that in the 1970s. So the 1970s stock returns *looked* less scary.
  • The stock market is not independent of the economy. A 30% drop in GDP with 25% unemployment makes a stock market drop look scarier because you (might) think you are more likely to need the money soon. The 1970s actually saw the economy grow at around 3%/year and we didn't have any GDP drop close to Great Depression levels. Same for the 2000 - 2013 years.
Yes, "we" ARE getting addicted to quick recoveries.

And Bob, the unlucky investor, managed to invest in one of the best performing stock markets of the 20th century. We don't know if the 1900s US stock market returns are representative of stock market returns going forward. We CAN'T know.

So maybe everything will be fine in the future for anyone investing in the US stock market with a long-ish time horizon. Or maybe things won't. We can't know, but we still have to do SOMETHING with our investable assets :-)
alex_686
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Re: 20 Years for SP500 to Recover

Post by alex_686 »

martincmartin wrote: Wed Aug 10, 2022 7:25 am
alex_686 wrote: Tue Aug 09, 2022 10:28 pm Yes, I am confident [that the stock market is a random walk]. This is adjacent to my day job. Lots of theory and empirical analysis on this.
Yes, and the theory and empirical analysis says it holds in some ways, at some times, approximately. All the theory has hypotheses that are only approximately met in practice. For example, Wikipedia says:

> Many decades of empirical research on return predictability has found mixed evidence.

The criticism section is long and as a lot of good information. It's far from settled among economists.
With mean reversion you are implying a larger mathematical structure that underlies stock movements, that past performance affects future performance.
Or that there's some underlying variable other than current price that affects future performance. Like future profits, and future interest rates. Or the "fighting the last war" nature of human beings.
Let say the S&P was at 4,000. It then crashes to 3,000. If the system was reverting to the mean then the market would not be a random walk. Rather there would be a strong bias for upwards movement.
Or a weak bias for upwards movement. Like, say, valuations.
There is no inherent reasons why long term rates should be 2% or 5%.
The Fed is trying to keep long term rates at 2%. When expected future rates are less, they lower the benchmark rate or even do quantitative easing. When higher, they raise the benchmark rate. They hope that they can cool expectations without causing a recession, but if faced with a choice between allowing persistent inflation or causing a recession, they'll cause a recession.

I think we have to agree to disagree. If belief in the EMH requires one to believe there is no inherent reason why long term rates should be 2% or 5%, and you believe this with all your experience from this being adjacent to your day job, I don't think I'm going to convince you. And I don't think you're going to convince me, or the markets, that 5% is as likely as 2% for long term rates.
But from time to the relationships change and we enter into a new secular period where we have new and different relationships. ... It is also why the longer the time frame the less mean reversion there is. You are moving from one secular period with one underlying structure to a different secular period with a different underlying structure.
Perhaps we mean different things by "mean reversion." If the different secular periods have different means, then that seems like it's not a random walk to me. And my point is: a secular period with a low mean is unlikely to be followed by another secular period with another low mean. For example, the 1970s had stagflation. The Fed was following a Keynesian model, saying "inflation isn't our problem, government needs to raise taxes and/or lower spending to fix it." After a decade of trying the same thing and it not working, eventually Paul Volker came around an very publicly raised interest rates to the point where it caused a recession. Since then, central banks have targeted inflation.

So the 1970s were a different secular period than 1982+. But the point is, people learned from what wasn't working, and tried something else. This behavior, of people trying new things when old things don't work then "fighting the last war," means a decade of low returns are unlikely to be followed by another decade of low returns.
hmmm. Let me try to put a finer point on some of my points.

A system that has a random walk does not mean the system is random. There can still be a underling principles that drive the system. What a Random Walk specifically means the amount of memory that system has. Or to put it another way, the amount of forecasting we can do with prior information.

Consider a dust mote and Brownian Motion. You have 2 forces acting of the dust mote, gravity and the random bombardment or air molecules. The overall motion of the dust mote is down - gravity is a harsh mistress. But you also have Brownian Motion knocking the dust mote left, right, up, and down. For simplicity sake lets just say left and right. 40% of the time the dust mote is going to jog right, 40% it is going to jog left, 10% down, and 10% chance up. You notice that the dust mote makes 10 up jogs. What is the chance that the next movement would be up? If it is a independent system, a random walk which Brownian Motion is, then the answer is 10%.

Here is the critical bit. If the system is mean reverting then the chance of a upwards motion would be something lower than 10%. The system would have a memory of the 10 up movements and would mean revert to some down movements.

So let us tie this back to your point on interest rates.

That rates are 2% or 5% are not a random event. There is a reason why they are where there are. We can create models to figure out those reasons and with reasonable confidence make a logical estimate of what they will be in the future.

We can look backwards at current rates and we can assume that future rates will be similar in the secular period. i.e., there is a modest amount of mean reversion. There are economic forces that drive rates within a band that makes rational sense. To bring this back to the dust mote, there is gravity that affects the system.

Now, onto the Random Walk, mean reversion, and what historical data tells us. You suggested that "low mean is unlikely to be followed by another secular period with another low mean", giving the 70s as a anecdotal example. This is not true. Tha would imply the system has a memory and will mean revert to its natural correct state. It does not. Humans are pattern recognition machines, and we are engineered to find patters even when there are none. I have worked with lots of data from lots of markets from lots of time periods. A low period is just as likely to follow a low period as a high period. There is no mean reversion.

Now, back to tie this back to what the OP is saying and why I think it is a false statement, and a rather optimism statement.

First, the critical point. If we have a crash in year 1 what is the chance that we will have a crash in year 2? Lets say we have had 10 years of bull markets, what is the chance of crash in year 11? The answer is that the chance is the same. i.e., crashes are random walk events, unseen in the prior data, a priori.

Second, I will grant this is kind of hard to see. See the point that humans are pattern recognition machines. But the OP is also working with a very small data set. That it has taken 20 years to recover in this data set does not statistical imply that is the natural maximum recovery period. The error bands are huge.

Third, the underlying economic forces that are in play are dynamic. Whatever caused a 10 or 20 year recovery period is not in operating now. Economic forces and relationships have changed. To put this is a specific case, I will refer back to the example where the market fell from 4,000 to 3,000. If the economic forces where constant then the system would be mean reverting. The correct inherent value of the market would be 4,000 and we should see movement back there. We don't. In my example interest rates have changed. The new correct value of the market is 3,000.

To wrap this all up.

People like to say that since the market has on average returned 10% a year for the past 100 years then it should continue to return 10% a year. i.e., that there is a mean reversion to 10%. Or that since the historical P/E ratio of the S&P has been 15 then the market will mean revert to a P/# of 15. Statically tests show this is not true.
Does the length of the current secular region tell us how long until the next
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
alfaspider
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Re: 20 Years for SP500 to Recover

Post by alfaspider »

withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
Source
This is just cherry picking the end date. The BH periodic investment method ALSO calls for periodic withdrawals. Yeah, if you pulled all of your investments out of the market during the bottom of the 2009 downturn, things look pretty bad. But if you really decided to retire in March 2009, you would have only withdrawn a small percentage of your portfolio in the 3.5-year period before the return to pre-financial crisis highs
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canadianbacon
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Re: 20 Years for SP500 to Recover

Post by canadianbacon »

CyclingDuo wrote: Thu Aug 11, 2022 8:48 am On August 8, 2018 in your initial post after joining Bogleheads, we find that even 4 years ago you were hashing out much of the same subject as this thread does regarding valuations and the big wait to invest when you wrote:
Thank you for the reminder (particularly to new posters). OP is back with another permabear thread, about eight months after his last one, which was however many months after the one before that. Eventually he will be right.
Bulls make money, bears make money, pigs get slaughtered.
withrye
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Re: 20 Years for SP500 to Recover

Post by withrye »

alfaspider wrote: Thu Aug 11, 2022 11:54 am
withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
Source
This is just cherry picking the end date. The BH periodic investment method ALSO calls for periodic withdrawals. Yeah, if you pulled all of your investments out of the market during the bottom of the 2009 downturn, things look pretty bad. But if you really decided to retire in March 2009, you would have only withdrawn a small percentage of your portfolio in the 3.5-year period before the return to pre-financial crisis highs
My post was not meant to say anything regarding retirement or withdrawals. That's why there is no mention of divestment, selling, withdrawal, or retirement in the post.

It was intended to highlight an example of a time when, after two decades of periodic investing, a portfolio dropped down to nearly zero real return after all contributions were accounted for. It is meant to show that there can be times, however fleeting, when your portfolio crashes down to a point where it can feel as if you've made zero progress.
Marseille07
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

withrye wrote: Thu Aug 11, 2022 1:05 pm My post was not meant to say anything regarding retirement or withdrawals. That's why there is no mention of divestment, selling, withdrawal, or retirement in the post.

It was intended to highlight an example of a time when, after two decades of periodic investing, a portfolio dropped down to nearly zero real return after all contributions were accounted for. It is meant to show that there can be times, however fleeting, when your portfolio crashes down to a point where it can feel as if you've made zero progress.
I don't think you can adjust contributions for inflation because if you were contributing 1000/mo in 1990, that's $1000 nominal then, which is worth a lot more than $1000 in 2009 when you ended the chart.
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CraigTester
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

CyclingDuo wrote: Thu Aug 11, 2022 8:48 am On August 8, 2018 in your initial post after joining Bogleheads, we find that even 4 years ago you were hashing out much of the same subject as this thread does regarding valuations and the big wait to invest when you wrote:
CraigTester wrote: Tue Aug 09, 2022 1:55 pm And I've yet to hear a compelling argument why anyone would possibly invest in the SP500 at today's valuation level
Craig Tester
- viewtopic.php?t=255972

We found it compelling to continue to invest in the S&P 500 at the valuation levels on August 8, 2018 with our regular bi-weekly contributions from paychecks. In fact, I was quickly maxing out my 403b + catch up contributions to capitalize on the remaining salary I had coming from a job that I had lost a few months earlier (academia pays until the end of the annual contract, which in my case was the final day in August), plus I was investing all of my unemployment checks thanks to my spouse's income being able to cover all of our household expenses while I searched for new employment. So yes - we found it compelling at the time.

:sharebeer

Compelling argument? That all depends on your interpretation of the return to date on an August 8th, 2018 investment. Yes, there were a couple of excellent entry points that were a bit more compelling total return wise (a few months after your post as well as the lows on March 23, 2020), however that would point more to lump sum/market timing than those of us who are the B&H, invest throughout your 35-40 year working career advocates. I haven't combed through your subsequent posts enough to know if you were or were not taking advantage of those entry points - or if you felt, based on CAPE, that the argument was still not compelling enough to lure your investment money into the S&P 500.

S&P 500 (SPY) at the August 8, 2018 price to yesterday's price has an annualized return of 12.01%.

Image

The return for August 8/2018 to yesterday's close is represented in VOO here...

Image

CyclingDuo
CyclingDuo - Your post is way off topic from the thread, but since you've taken the time to write, I'll try to respond in the context of this thread...

First of all, as addressed by alluringreality, please learn to express all things financial in inflation adjusted terms. (e.g. Try buying a can of peas for the price printed on the label 10 years ago). Your 12% number is way off.

Second, as I've discussed many times, I had a lot of naysayers like you "chuckling" in 1998 when I exited (admittedly too early), but it worked out pretty well in the end....(make that extremely well, not to brag)

Third, investing is a long term process. I don't know of any valuation metric(s) that provide(s) high correlation to outcomes within a 4 year window.... (I encourage you to scan the roller coaster rides within the 4 time periods I posted about in my OP.... You can find lots of 4 year data points within those windows to make whatever short term claim/chuckle you may want to make...

Fourth, as I discussed in previous posts, I did take advantage of some buying opportunities in the March 2020 time period, but I didn't bet the farm (yet)...(Warren Buffett missed this one too as we are still waiting to see the long-term consequences of the $5T in government intervention)

Fifth, as mentioned in my OP, buy-n-holders can find themselves waiting for up to 20 years to permanently recover to previous high water marks....If this is a conscious choice, that's great.... If you're still accumulating even better....but if you're retired, 20 years underwater is a long time....

6th and Finally, if you're happy with your financial performance at this point, that's great....I never encourage anyone to change horses in the middle of the stream... Just understand that we won't always be having this type of exchange at the tail end of the longest bull market in history....

All the best,

Craig Tester
withrye
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Re: 20 Years for SP500 to Recover

Post by withrye »

Marseille07 wrote: Thu Aug 11, 2022 1:10 pm
withrye wrote: Thu Aug 11, 2022 1:05 pm My post was not meant to say anything regarding retirement or withdrawals. That's why there is no mention of divestment, selling, withdrawal, or retirement in the post.

It was intended to highlight an example of a time when, after two decades of periodic investing, a portfolio dropped down to nearly zero real return after all contributions were accounted for. It is meant to show that there can be times, however fleeting, when your portfolio crashes down to a point where it can feel as if you've made zero progress.
I don't think you can adjust contributions for inflation because if you were contributing 1000/mo in 1990, that's $1000 nominal then, which is worth a lot more than $1000 in 2009 when you ended the chart.
Perhaps I have misunderstood how PV adjusts for inflation.

My understanding is that $1000 contributed monthly starting in January 1989 with an inflation adjustment would be equal to 242,000 of 1989-equivalent dollars in February 2009 (242 months of contributions).

As a result, an inflation-adjusted portfolio value of $243,151 represents having 1,151 more 1989-equivalent dollars than what you've contributed over those same 20 years+2 months.

Am I mistaken in this understanding? My understanding is that everything shown in PV after adjusting for inflation is shown in start-date-equivalent terms, not end-date-equivalent terms. The nominal value of $1000 invested in 1989 is higher in 2009, but the inflation-adjusted value should be the $1000. Apologies if I've misunderstood, happy to be corrected.
Topic Author
CraigTester
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

canadianbacon wrote: Thu Aug 11, 2022 12:06 pm
CyclingDuo wrote: Thu Aug 11, 2022 8:48 am On August 8, 2018 in your initial post after joining Bogleheads, we find that even 4 years ago you were hashing out much of the same subject as this thread does regarding valuations and the big wait to invest when you wrote:
Thank you for the reminder (particularly to new posters). OP is back with another permabear thread, about eight months after his last one, which was however many months after the one before that. Eventually he will be right.
Canadianbacon,

Not sure what your post has to do with the topic of this thread...?

P.S.

I haven't heard from you since I worked very hard to explain why your bond fund was about to lose money... I even took the time to walk you through an example....But as I recall, you dismissed my advice and refused to accept that it was even possible to lose money in bonds.....

Look up the exchange if you like..., and if you had listened, you would be richer now..... Don't say I didn't try....

Good luck to you,

Craig Tester
alfaspider
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Re: 20 Years for SP500 to Recover

Post by alfaspider »

withrye wrote: Thu Aug 11, 2022 1:05 pm
alfaspider wrote: Thu Aug 11, 2022 11:54 am
withrye wrote: Wed Aug 10, 2022 3:52 pm Some posters here have taken the reasonable argument that these admittedly cherry picked periods have shown poor returns for lump sum investments. I'd like to present one of my (least) favorite counterexamples to show that periodic investment is not always a silver bullet out of terrible 20-year periods.

Consider a new graduate in 1988 who decides to start investing in January 1989 in the total US stock market. They invest $1000 each month, adjusted for inflation, for the next 20 years.

What is their portfolio value in February 2009, after 20 years of investing, accounting for dividend reinvestment and adjustments for inflation? $243,151.

How much money did they contribute to the portfolio over those same 20 years, adjusted for inflation? $242,000.

This diligent saver, who stayed the course through thick and thin, has an inflation-adjusted return of 0.48%. That's not annualized, that's their total cumulative return.

Yes, the market then went on an historic bull run. But it must be admitted that after 20 years of diligent savings, the investor is staring at an absolutely dismal result at the bottom of the worst financial crisis of their lifetime with no indication of whether or when things will turn around. The market can truly be demoralizing for a much longer period than we often imagine.

Image
Source
This is just cherry picking the end date. The BH periodic investment method ALSO calls for periodic withdrawals. Yeah, if you pulled all of your investments out of the market during the bottom of the 2009 downturn, things look pretty bad. But if you really decided to retire in March 2009, you would have only withdrawn a small percentage of your portfolio in the 3.5-year period before the return to pre-financial crisis highs
My post was not meant to say anything regarding retirement or withdrawals. That's why there is no mention of divestment, selling, withdrawal, or retirement in the post.

It was intended to highlight an example of a time when, after two decades of periodic investing, a portfolio dropped down to nearly zero real return after all contributions were accounted for. It is meant to show that there can be times, however fleeting, when your portfolio crashes down to a point where it can feel as if you've made zero progress.
I can't account for anybody's feelings, but I don't think too many people keep a running tab of how much money they've contributed in the aggregate to their portfolio. Everyone is going to have a different feeling on when a drawdown is big enough that they feel like they've made no progress.
Marseille07
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

withrye wrote: Thu Aug 11, 2022 1:19 pm Perhaps I have misunderstood how PV adjusts for inflation.

My understanding is that $1000 contributed monthly starting in January 1989 with an inflation adjustment would be equal to 242,000 of 1989-equivalent dollars in February 2009 (242 months of contributions).

As a result, an inflation-adjusted portfolio value of $243,151 represents having 1,151 more 1989-equivalent dollars than what you've contributed over those same 20 years+2 months.

Am I mistaken in this understanding? My understanding is that everything shown in PV after adjusting for inflation is shown in start-date-equivalent terms, not end-date-equivalent terms. The nominal value of $1000 invested in 1989 is higher in 2009, but the inflation-adjusted value should be the $1000. Apologies if I've misunderstood, happy to be corrected.
I'm actually not sure either, but in this context imo it makes sense not to adjust for inflation.

In nominal terms, this investor contributed 242K over 242 months. In 2009, their portfolio stands at 428K nominal. I don't think this is a terrible outcome.
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Re: 20 Years for SP500 to Recover

Post by McQ »

CraigTester wrote: Wed Aug 10, 2022 10:50 pm ...

Thank you for the assist, Professor!

Just skimmed/enjoyed your article (will read more thoroughly later)...

Loved the line, "Few questioned Siegel’s data series because the story these told was so reassuring"

You could sum up this thread with a slight modification to this same sentence....

Just replace the words "Siegel's data series" with "The NYT's version of the Great Depression Recovery"

All the Best,

Craig Tester
Thanks Craig Tester. As promised, here is the UK data: annualized real return over the trailing 20 years, December to December only, so not as fine-grained as the Shiller data you posted or the Kaplan data Nisiprius posted. Courtesy of Bryan Taylor at GFD.

Image

My interpretation: Stocks are volatile, long-term or short. UK 20-year real returns had never dropped below 0%, in over two hundred years of trading, until they did. Or if you prefer, UK 20-year returns had never been higher than 11%, over three centuries, until they were.

PS: I've learned that some people get really, really upset if you question the gospel on stocks...
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
withrye
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Re: 20 Years for SP500 to Recover

Post by withrye »

Marseille07 wrote: Thu Aug 11, 2022 1:32 pm
withrye wrote: Thu Aug 11, 2022 1:19 pm Perhaps I have misunderstood how PV adjusts for inflation.

My understanding is that $1000 contributed monthly starting in January 1989 with an inflation adjustment would be equal to 242,000 of 1989-equivalent dollars in February 2009 (242 months of contributions).

As a result, an inflation-adjusted portfolio value of $243,151 represents having 1,151 more 1989-equivalent dollars than what you've contributed over those same 20 years+2 months.

Am I mistaken in this understanding? My understanding is that everything shown in PV after adjusting for inflation is shown in start-date-equivalent terms, not end-date-equivalent terms. The nominal value of $1000 invested in 1989 is higher in 2009, but the inflation-adjusted value should be the $1000. Apologies if I've misunderstood, happy to be corrected.
I'm actually not sure either, but in this context imo it makes sense not to adjust for inflation.

In nominal terms, this investor contributed 242K over 242 months. In 2009, their portfolio stands at 428K nominal. I don't think this is a terrible outcome.
I don't agree that it makes sense not to adjust for inflation. Why would someone start contributing $1000/mo in 1989 and then 20 years later still be contributing $1000 in nominal terms? That'd have the purchasing power of around $580. I don't know of anyone who sets a nominal savings goal. In fact, most people are motivated to save either a proportion of their income (which for many increases with inflation, whether or not it exceeds or lags it) or they are motivated by the size of tax-advantaged retirement account space available to them (which is pegged to inflation).

Less important is that I don't know where you found the 428k nominal number. I think it would be helpful to share PV links (as I have) when discussing specific scenarios so we can all check each other's inputs.
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Taylor Larimore
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Re: 20 Years for SP500 to Recover

Post by Taylor Larimore »

Bogleheads:

When I began investing in 1950, the S&P 500 stocks were about 20*. Today they are priced over 4,000 (not including dividends).

If I had simply bought the S&P 500 stocks, and done nothing, I would be much wealthier today.

* Source: Stock Trader's Almanac

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Presumably you are accumulating money now and putting money away for the future. Do not, under any circumstances, stop doing that. That is the first rule. Don't stop investing. The second rule is, particularly for the younger people in the world: a good solid market decline is a blessing. You'll be buying - if you invest each month - stocks at lower and lower prices. Don't be antagonized by that; use that as an opportunity of a lifetime."
"Simplicity is the master key to financial success." -- Jack Bogle
Marseille07
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

withrye wrote: Thu Aug 11, 2022 1:44 pm Less important is that I don't know where you found the 428k nominal number. I think it would be helpful to share PV links (as I have) when discussing specific scenarios so we can all check each other's inputs.
I simply went to your backtest and unchecked the "inflation adjusted" box. I didn't mean to be ambiguous and should've mentioned this.
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canadianbacon
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Re: 20 Years for SP500 to Recover

Post by canadianbacon »

CraigTester wrote: Thu Aug 11, 2022 1:22 pm I haven't heard from you since I worked very hard to explain why your bond fund was about to lose money... I even took the time to walk you through an example....But as I recall, you dismissed my advice and refused to accept that it was even possible to lose money in bonds.....
I don't consider it a valuable use of time to look up your old posts, but the way you characterize it here strikes me as false. Fortunately I have stayed invested since (and before) 2018, and am rich enough for my needs. Thank you for the well wishes.
Bulls make money, bears make money, pigs get slaughtered.
withrye
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Re: 20 Years for SP500 to Recover

Post by withrye »

Marseille07 wrote: Thu Aug 11, 2022 1:56 pm
withrye wrote: Thu Aug 11, 2022 1:44 pm Less important is that I don't know where you found the 428k nominal number. I think it would be helpful to share PV links (as I have) when discussing specific scenarios so we can all check each other's inputs.
I simply went to your backtest and unchecked the "inflation adjusted" box. I didn't mean to be ambiguous and should've mentioned this.
I don't think your comparison is appropriate if that's all you did. You claimed the user contributed $242k in nominal terms but ends with $428k in nominal terms. But if all you did was uncheck the "inflation-adjusted" box below the graph, what you have is $242k contributed in real terms and $428k in nominal terms.

It would be correct to claim $242k of nominal contributions only if you also change the "Inflation Adjusted" input under "Contribution Amount" in the top half of the page to "No."

This yields a $242k nominal contribution history and a $337k nominal portfolio value in Feb 2009.

https://www.portfoliovisualizer.com/bac ... ion1_1=100
Marseille07
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

withrye wrote: Thu Aug 11, 2022 2:03 pm I don't think your comparison is appropriate if that's all you did. You claimed the user contributed $242k in nominal terms but ends with $428k in nominal terms. But if all you did was uncheck the "inflation-adjusted" box below the graph, what you have is $242k contributed in real terms and $428k in nominal terms.

It would be correct to claim $242k of nominal contributions only if you also change the "Inflation Adjusted" input under "Contribution Amount" in the top half of the page to "No."

This yields a $242k nominal contribution history and a $337k nominal portfolio value in Feb 2009.

https://www.portfoliovisualizer.com/bac ... ion1_1=100
You're right. 242K nominal contribution history became 337K nominal in 2009. My conclusion doesn't change though, this is not awful in my opinion.
withrye
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Re: 20 Years for SP500 to Recover

Post by withrye »

Marseille07 wrote: Thu Aug 11, 2022 2:09 pm
withrye wrote: Thu Aug 11, 2022 2:03 pm I don't think your comparison is appropriate if that's all you did. You claimed the user contributed $242k in nominal terms but ends with $428k in nominal terms. But if all you did was uncheck the "inflation-adjusted" box below the graph, what you have is $242k contributed in real terms and $428k in nominal terms.

It would be correct to claim $242k of nominal contributions only if you also change the "Inflation Adjusted" input under "Contribution Amount" in the top half of the page to "No."

This yields a $242k nominal contribution history and a $337k nominal portfolio value in Feb 2009.

https://www.portfoliovisualizer.com/bac ... ion1_1=100
You're right. 242K nominal contribution history became 337K nominal in 2009. My conclusion doesn't change though, this is not awful in my opinion.
That portfolio value represents 1.67% nominal compound annual growth rate over 20 years. Cash did better over the same period. I think we will agree to disagree on whether or not that is an awful result.
Marseille07
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

withrye wrote: Thu Aug 11, 2022 2:14 pm That portfolio value represents 1.67% nominal compound annual growth rate over 20 years. Cash did better over the same period. I think we will agree to disagree on whether or not that is an awful result.
How did you calculate that? Since this investor started off with $0 in 1989, you can't base your CAGR calculation as if they had 242K the whole time.
withrye
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Re: 20 Years for SP500 to Recover

Post by withrye »

Marseille07 wrote: Thu Aug 11, 2022 2:19 pm
withrye wrote: Thu Aug 11, 2022 2:14 pm That portfolio value represents 1.67% nominal compound annual growth rate over 20 years. Cash did better over the same period. I think we will agree to disagree on whether or not that is an awful result.
How did you calculate that? Since this investor started off with $0 in 1989, you can't base your CAGR calculation as if they had 242K the whole time.
You're right, my apologies. There isn't an intuitive value for this return (I don't fully understand how PV calculates TWRR and MWRR when factoring or not factoring inflation, so I am skeptical of their reported numbers) so I used the shortcut of comparing the total contributed to the total value of the account.

As I mentioned at the top of this conversation, I disagree that it makes sense to use nominal values here as it is highly unlikely that someone would make long-term investment contributions on a constant nominal basis. Adjusting for inflation (as we do in almost all discussions of long term market analyses) seems more appropriate and lends itself to more intuitive understandings of the results.
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CraigTester
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

McQ wrote: Thu Aug 11, 2022 1:38 pm
CraigTester wrote: Wed Aug 10, 2022 10:50 pm ...

Thank you for the assist, Professor!

Just skimmed/enjoyed your article (will read more thoroughly later)...

Loved the line, "Few questioned Siegel’s data series because the story these told was so reassuring"

You could sum up this thread with a slight modification to this same sentence....

Just replace the words "Siegel's data series" with "The NYT's version of the Great Depression Recovery"

All the Best,

Craig Tester
Thanks Craig Tester. As promised, here is the UK data: annualized real return over the trailing 20 years, December to December only, so not as fine-grained as the Shiller data you posted or the Kaplan data Nisiprius posted. Courtesy of Bryan Taylor at GFD.

Image

My interpretation: Stocks are volatile, long-term or short. UK 20-year real returns had never dropped below 0%, in over two hundred years of trading, until they did. Or if you prefer, UK 20-year returns had never been higher than 11%, over three centuries, until they were.

PS: I've learned that some people get really, really upset if you question the gospel on stocks...
Thanks Professor!

So am I reading your chart correctly to observe that the UK stock market did even worse than US for the 20 year period ending around 1920….But then did better than the US in the 20 year period ending around 1950…..The latter is a bit of a head scratcher in the context of WW2….

And bigger picture, it looks like when either the US or UK market had problems, the other did too....but perhaps there's a phase shift?

To that end, how much trouble would it be to overlay the US stock market data onto the above chart....? One of the topics that is endlessly debated on this forum is the interplay between US and Int'l...(Please don't bother if its not at your fingertips, but would be interesting to see if its just a matter of a quick chart)

And finally, to your PS, as an out-of-the-closet market timer, I am treated with very high suspicion on this forum....So I suspect if you are tagged as the guy suggesting stocks don't always win, we might be treated similarly.......but perhaps we all learn something anyway... 8-)

Craig Tester
Last edited by CraigTester on Thu Aug 11, 2022 2:52 pm, edited 1 time in total.
Marseille07
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

withrye wrote: Thu Aug 11, 2022 2:30 pm As I mentioned at the top of this conversation, I disagree that it makes sense to use nominal values here as it is highly unlikely that someone would make long-term investment contributions on a constant nominal basis. Adjusting for inflation (as we do in almost all discussions of long term market analyses) seems more appropriate and lends itself to more intuitive understandings of the results.
I was just curious if something is off in PV when nominal went from 242K to 337K but real stayed flat, unless this investor was extremely unlucky and they kept investing more $ at inopportune timing.

Simulating contributions is tricky for this reason, as opposed to simply setting the initial value & simulate without contributions.
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PicassoSparks
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Re: 20 Years for SP500 to Recover

Post by PicassoSparks »

I find it fascinating that there's so many posts with different interpretations about how to properly understand realized returns of the market, let alone expected returns. I wouldn't think there'd be so much controversy about what had happened, given a system that uses precise numbers to keep score.

We don't know the future and we don't know the past either.
Alpha4
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Re: 20 Years for SP500 to Recover

Post by Alpha4 »

CraigTester wrote: Thu Aug 11, 2022 2:35 pm
McQ wrote: Thu Aug 11, 2022 1:38 pm
CraigTester wrote: Wed Aug 10, 2022 10:50 pm ...

Thank you for the assist, Professor!

Just skimmed/enjoyed your article (will read more thoroughly later)...

Loved the line, "Few questioned Siegel’s data series because the story these told was so reassuring"

You could sum up this thread with a slight modification to this same sentence....

Just replace the words "Siegel's data series" with "The NYT's version of the Great Depression Recovery"

All the Best,

Craig Tester
Thanks Craig Tester. As promised, here is the UK data: annualized real return over the trailing 20 years, December to December only, so not as fine-grained as the Shiller data you posted or the Kaplan data Nisiprius posted. Courtesy of Bryan Taylor at GFD.

Image

My interpretation: Stocks are volatile, long-term or short. UK 20-year real returns had never dropped below 0%, in over two hundred years of trading, until they did. Or if you prefer, UK 20-year returns had never been higher than 11%, over three centuries, until they were.

PS: I've learned that some people get really, really upset if you question the gospel on stocks...
Thanks Professor!

So am I reading your chart correctly to observe that the UK stock market did even worse than US for the 20 year period ending around 1920….But then did better than the US in the 20 year period ending around 1950…..The latter is a bit of a head scratcher in the context of WW2….

And bigger picture, it looks like when either the US or UK market had problems, the other did too....but perhaps there's a phase shift?

To that end, how much trouble would it be to overlay the US stock market data onto the above chart....? One of the topics that is endlessly debated on this forum is the interplay between US and Int'l...(Please don't bother if its not at your fingertips, but would be interesting to see if its just a matter of a quick chart)

And finally, to your PS, as an out-of-the-closet market timer, I am treated with very high suspicion on this forum....So I suspect if you are tagged as the guy suggesting stocks don't always win, we might be treated similarly.......but perhaps we all learn something anyway... 8-)

Craig Tester
I don't have access to GFD but from what I know of UK stock returns--Barclays has them available for free as a PDF showing UK equity total returns annually from 1900 to 2019 in nominal terms and also showing what UK inflation was each year; also, Barton Biggs's Wealth, War, and Wisdom has some info on British equity returns for this period--I can take a stab at guessing why this might've been the case (Dr. McQuarrie, please feel free to chime in and correct me if any of this is wrong):

1. UK stocks never boomed as much as US stocks did during the 1920s; as a result, they weren't so overpriced in 1929 and didn't fall nearly as much from Oct 1929 to 1931 and 1932; but from Jan 1932 to 1936 they did almost as well as American stocks

2. In the 1937 "depression within a depression" crash UK stocks only fell around 12%; they also didn't recover in 1938 like American stocks did (they lost around 9.4% in 1938 rather than gaining nearly 31% like American stocks did) but then they followed that in 1939-41 by not having three losing or almost losing years in a row like American stocks did. From 1942-1945 both American and UK stocks did well (although American ones did slightly better) but then in 1946-47 UK equities had better nominal (and better still when considered in real inflation-adjusted terms in UK pounds) than American stocks returned in American dollars.

3. In 1948 and 1949 UK stocks again did worse than American stocks but--given their performance vs American stocks in 1946 and 1947--this just let the American stocks catch up somewhat.

4. Finally, I think the most important factor here might be that the UK stock returns are (presumably) in pounds sterling while the American stock returns are presumably in US dollars. The pound was devalued twice (that I know of; maybe it happened more than that but I am only aware of it happening twice) during this time period (1931 when it was taken off gold and allowed to float and then again in 1949 under Bretton Woods when it was devalued against the US dollar so that one pound went from buying $4.02 to only buying $2.80) whereas the dollar was only devalued once (in the mid-1930s when it went off the $20.67 an ounce gold standard and gold was revalued to be worth $35 an ounce instead such that the USD lost almost half its value vs the old gold standard). Going by the Barclays data I mentioned earlier, an investment in UK stocks on 1-1-1930 made in pounds was worth around 3.06 times its starting value in nominal terms in pounds by the end of 1949 (if you want to use 1-1-1931 to 12-31-1950 numbers instead it was worth around 3.52 times the starting amount); however, after revaluing this in dollars to account for the 1949 pound sterling devalution (note that I haven't even tried to account for the US and British devaluations in the 1930s and have assumed that since both devalued then those devaluations would roughly cancel each other out) then the investment in British stocks made starting in 1930 was only worth (in USD) 2.13 times its starting value and the investment in British stocks made starting in 1931 was only worth (in USD) around 2.46 times its starting value. An investment in a broad US stock index (again, made in USD...obviously) on 1-1-1930 was worth on 12-31-1949 approximately 2.39 times its starting value and an investment made on 1-1-1931 was worth on 12-31-1950 around 4.19 times its starting value. Note that while I did adjust for the pound devaluation in 1949 to convert UK stock returns to USD, all figures otherwise are nominal (i.e. neither the UK nor US returns given above consider UK inflation or US inflation).
investnoob
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Re: 20 Years for SP500 to Recover

Post by investnoob »

homebuyer6426 wrote: Tue Aug 09, 2022 2:07 pm I found the numbers look much better for the investor if one looks at the realistic accumulation over an entire career, then the realistic decumulation in retirement. Almost nobody invests a lump sum and then spends it all 20 years later.

For example, investing just $10,000 yearly from 1999 until now, you end up with a million. And you wouldn't spend that million all at once, so that would increase your buffer even more.
That makes sense. However, the big underlying assumption of $10k invested a year is what kinda kills it. I first started working in 1999, and I made $18,000 that year. I never invested $10,000 until 2011.

These scenarios are always a bit too simplistic.
homebuyer6426
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Re: 20 Years for SP500 to Recover

Post by homebuyer6426 »

investnoob wrote: Fri Aug 12, 2022 10:53 am
homebuyer6426 wrote: Tue Aug 09, 2022 2:07 pm I found the numbers look much better for the investor if one looks at the realistic accumulation over an entire career, then the realistic decumulation in retirement. Almost nobody invests a lump sum and then spends it all 20 years later.

For example, investing just $10,000 yearly from 1999 until now, you end up with a million. And you wouldn't spend that million all at once, so that would increase your buffer even more.
That makes sense. However, the big underlying assumption of $10k invested a year is what kinda kills it. I first started working in 1999, and I made $18,000 that year. I never invested $10,000 until 2011.

These scenarios are always a bit too simplistic.
True. But at least your low saving years were during the lost decade, so that works in your favor.
45% Total Stock Market | 52% Consumer Staples | 3% Short Term Reserves
McQ
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Re: 20 Years for SP500 to Recover

Post by McQ »

Alpha4 wrote: Thu Aug 11, 2022 7:06 pm
CraigTester wrote: Thu Aug 11, 2022 2:35 pm ...
So am I reading your chart correctly to observe that the UK stock market did even worse than US for the 20 year period ending around 1920….But then did better than the US in the 20 year period ending around 1950…..The latter is a bit of a head scratcher in the context of WW2….

And bigger picture, it looks like when either the US or UK market had problems, the other did too....but perhaps there's a phase shift?

To that end, how much trouble would it be to overlay the US stock market data onto the above chart....? One of the topics that is endlessly debated on this forum is the interplay between US and Int'l...(Please don't bother if its not at your fingertips, but would be interesting to see if its just a matter of a quick chart)

And finally, to your PS, as an out-of-the-closet market timer, I am treated with very high suspicion on this forum....So I suspect if you are tagged as the guy suggesting stocks don't always win, we might be treated similarly.......but perhaps we all learn something anyway... 8-)

Craig Tester
I don't have access to GFD but from what I know of UK stock returns--Barclays has them available for free as a PDF showing UK equity total returns annually from 1900 to 2019 in nominal terms and also showing what UK inflation was each year; also, Barton Biggs's Wealth, War, and Wisdom has some info on British equity returns for this period--I can take a stab at guessing why this might've been the case (Dr. McQuarrie, please feel free to chime in and correct me if any of this is wrong):

1. UK stocks never boomed as much as US stocks did during the 1920s; as a result, they weren't so overpriced in 1929 and didn't fall nearly as much from Oct 1929 to 1931 and 1932; but from Jan 1932 to 1936 they did almost as well as American stocks

2. In the 1937 "depression within a depression" crash UK stocks only fell around 12%; they also didn't recover in 1938 like American stocks did (they lost around 9.4% in 1938 rather than gaining nearly 31% like American stocks did) but then they followed that in 1939-41 by not having three losing or almost losing years in a row like American stocks did. From 1942-1945 both American and UK stocks did well (although American ones did slightly better) but then in 1946-47 UK equities had better nominal (and better still when considered in real inflation-adjusted terms in UK pounds) than American stocks returned in American dollars.

3. In 1948 and 1949 UK stocks again did worse than American stocks but--given their performance vs American stocks in 1946 and 1947--this just let the American stocks catch up somewhat.

4. Finally, I think the most important factor here might be that the UK stock returns are (presumably) in pounds sterling while the American stock returns are presumably in US dollars. The pound was devalued twice (that I know of; maybe it happened more than that but I am only aware of it happening twice) during this time period (1931 when it was taken off gold and allowed to float and then again in 1949 under Bretton Woods when it was devalued against the US dollar so that one pound went from buying $4.02 to only buying $2.80) whereas the dollar was only devalued once (in the mid-1930s when it went off the $20.67 an ounce gold standard and gold was revalued to be worth $35 an ounce instead such that the USD lost almost half its value vs the old gold standard). Going by the Barclays data I mentioned earlier, an investment in UK stocks on 1-1-1930 made in pounds was worth around 3.06 times its starting value in nominal terms in pounds by the end of 1949 (if you want to use 1-1-1931 to 12-31-1950 numbers instead it was worth around 3.52 times the starting amount); however, after revaluing this in dollars to account for the 1949 pound sterling devalution (note that I haven't even tried to account for the US and British devaluations in the 1930s and have assumed that since both devalued then those devaluations would roughly cancel each other out) then the investment in British stocks made starting in 1930 was only worth (in USD) 2.13 times its starting value and the investment in British stocks made starting in 1931 was only worth (in USD) around 2.46 times its starting value. An investment in a broad US stock index (again, made in USD...obviously) on 1-1-1930 was worth on 12-31-1949 approximately 2.39 times its starting value and an investment made on 1-1-1931 was worth on 12-31-1950 around 4.19 times its starting value. Note that while I did adjust for the pound devaluation in 1949 to convert UK stock returns to USD, all figures otherwise are nominal (i.e. neither the UK nor US returns given above consider UK inflation or US inflation).
+1, Alpha4, excellent point about foreign exchange. My GFD-sourced chart is real return in pounds. Craig Tester, I'll do the overlay in a bit. But it will be real return in USD, so all should keep alpha4's discussion in mind.

One other resource for anyone studying British markets in the 1920s and 1930s: Barry Eichengreen, Golden Fetters, for the blow-by-blow on the 1931 devaluation of the pound and delinking from gold--the "end of the beginning" of the demise of the gold standard.
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
nigel_ht
Posts: 4742
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Re: 20 Years for SP500 to Recover

Post by nigel_ht »

CraigTester wrote: Tue Aug 09, 2022 1:55 pm I continue to see numerous misleading/misinformed claims throughout this forum, like:

"The SP500 recovered in several years after the great depression", or the "SP500 has always recovered in just a few years, stay the course, etc…"

And while these claims can sometimes be tortured to be sort of true (for an interim moment), they can be extremely misleading or sometimes just plain wrong.

And most importantly, they can perhaps lead some unsuspecting Bogleheads to sign up for more risk than they had intended/understood with their AA, etc...


So…, Rather than derail other threads when these types of claims are made, I thought it would be helpful to everyone to have the facts nailed down.

To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)

So I invite all the number crunchers out there to vet this data, argue about rounding error, cherry picking, etc....

But once we all agree on the math, perhaps we can add some version of this to the basic body of knowledge that all Bogleheads understand as they make their AA decisions, rebalancing schedules, lump sum decisions, etc.

All the best,

Craig Tester
Image

and

Image

You show different numbers than ERN.

Meh, if the point is that the market sometimes takes a while to recover then okay sure...that should already well understood simply by looking at the 1929 or 2000 scenario.

Do you suggest an alternative course of action to "stay the course"?

And SWR accounts for 1929 and 1966...so unless 2000 turns out worse I dunno how much your post matters to the retiree. During accumulation, as everyone else has pointed out, it's just buying on discount. Eventually the market will recover.
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