[quote=livinincali]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.[/quote]I agree that no one bought all of their assets at the absolute low. But no one bought all of their assets at the absolute high of 2000 either. But that seems to be what you were insinuating with this statement:
[quote=livinincali]Look at the stock market bubble in 2000. If you invested in stocks back in 1980’s or 1990’s you were still way up after the crash but new investors to the market in 2000 going forward would be extremely lucky to be beating CPI over the years even now when we’re approaching the 2008 highs.[/quote]The only reason why I brought up 2001-2002 was to disprove your statement about buying in 2000. It wasn’t meant to say that we all sit in cash and wait for that bottom. If we can truly time the market, we wouldn’t be here today on this forum talking about timing the market.
[quote=livinincali]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]Beating CPI during the 12 years where stock is basically flat and we saw one of the major stock market crash this side of the great depression is pretty impressive to me. Now, how would your number look if you extend it to 20 years instead of 12? Here’s a helpful link for you: http://www.moneychimp.com/features/market_cagr.htm
Based on their calculator, your inflation adjusted return for the S&P over the last 11 years is basically 0. However, if you extend that calculator back another 11 years to 1990, your annualized inflation adjusted return is 5.41%. If you extend that back another 10 years to 1980, your annualized inflation adjusted return would be 7.42%. So, the question is, will we see 20-30 more years of what we saw in the last 11 years, or will we see something like the 80s-90s?
Also, keep in mind that we might not buy stock in one lump sum, we are essentially doing just that with housing. If we bought at or near the bottom (I say we’ve been there for the last 4 years), lock in the bottom of interest rate, you’re sitting pretty. It’s not like you’re buying a new house every month, like you do with stocks.
[quote=livinincali]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. [/quote]Although we have a lot of aging baby boomer, we also are having a lot of birth. 4 years ago, we had more birth in 2008 than any year during the baby boomer period. So, we do not have similar problem Japan has, which is, birth can’t keep pace with death and retirement. Which is why Japan is paying people to have kids. We also are much more friendlier to immigrations. What you’re seeing now might be bad, in term of workers vs retiree ratio, however, I don’t see it lasting. Since the babies who were born in 2008 will reach their working age in 14 years. That’s a huge population that will enter the work force in the near future, which will offset the retiring baby boomers.
[quote=livinincali]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.[/quote]I’ll offset this with, the market with “The Market Can Stay Irrational Longer Than You Can Stay Solvent”. We have no idea when or how it will end, but a crash in 2000 & 2008 for stocks and 2005 for housing, changes their trajectory quite a bit.
