[quote=AN]
Stocks didn’t drift lower over after the .com crash. It crashed, then “drift” higher, until 2008. Today, the NASDAQ is at a 12 years high. If you bought in January 2000, yes, you’re still under, but if you bought in 2001-2002, you’re probably up over 100% over 10-11 years. That’s not too shabby and I wouldn’t call that as drifting lower.
[/quote]
But nobody bought all of their assets at the absolute low. Most 401K investors have been buying every month or twice a month. They bought both at the highs, the lows, and everything in between. They’ve seen their portfolio go up and they’ve seen their portfolio go down. If you we’re to take all of your contributions over the years and compared it to the value of your portfolio now it would be highly unlikely that you’d be ahead by over 100%, unless you successfully timed the market or focused on a narrow set of investments.
If you were to make some assumptions about 401K investing this is what I come up with.
Jan 2001 you have a starting salary of 40K and you contribute 20% of you income every month to SPY. You assume a 7% per year raise. So year 2 you’re making 42,800 and contributing 713 per month.
At the end of the first year
Contrib Acc Value % return
8000 7762.891702 -2.96%
At the peak of the bubble Dec 2007
69232.16874 91796.81951 32.59%
At the end of 2008
82078.42055 67930.22094 -17.24%
At the end of 2010
110531.5837 133925.4934 21.16%
Right now
138897.9063 193025.8715 38.97%
So over the past 12 years you’ve been up almost 40% and down almost 20%. As of right now it look pretty good but if you look at 2001 to 2011 your stock portfolio went up 20.45% yet CPI went from 174 to 226 or 29.8%. So those 10 years of diligent investing in a balanced portfolio left you 10% behind CPI. As of right now CPI is 31.6% so your stock portfolio has performed 7% better than CPI. Have you really successfully done well against inflation if you’re only up 7% versus CPI right now. You’ve barely won and it wouldn’t take much of a stock market correction to have you back in a losing position again.
[quote=AN]
I see our housing behave similar to our stock market instead of like the Japanese housing market. Japan have problems we don’t have. Such as an aging population and low birth rate that can’t even keep up w/ the death rate. There are others, but because your demographics are different, it’s hard to draw a link.
[/quote]
Our population is aging as well. Maybe we’re a little further back in the curve, but pretty much everyone agrees that the aging boomer population is the huge problem for Medicare and Social Security. Japan learned that it’s hard to grow when you have an aging population that needs to be supported and we’re going to have the same problems here if not yet, soon. It’s just a numbers game Japan might be 1.8 workers for every retiree, we might be 2.2 workers, but that a far cry from the 5 to 1 that we had just 10 years ago.
The bottom line is all exponential growth must come to an end at some point. Whether it’s bacteria in a petri dish, or decades of debt.
