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Of course, it sat at 1527 in May, 2000. So a slight loss over almost 13-years.
WRONG! First of all the S&P 500 was not over 1500 AT ANY TIME DURING THE MONTH OF MAY 2000.
It hit 1527 on March 23 and March 24 of 2000, then it started on a downward trend.
More importantly, you are WRONG BECAUSE YOU DIDN'T INCLUDE THE DIVIDENDS!!!!
With dividends reinvested a $10,000 investment in the S&P 500 on March 23, 2000 would have turned into $12,627.15 on 2/1/13. Of course, that doesn't take expenses into account. With a Vanguard S&P 500 Index fund in their highest expense share class, you still would have come out ahead with $12,474.20. Not great, but still a positive return.
It does seem to be pointless to argue with someone who isn't going to grant that there is even better research supporting the efficient-market hypothesis. The key is to grant that reasonable people disagree about this, and yes, I will grant that.
I think the problem is that you're comparing the "average" mutual fund with an index fund. The thing is, there are a lot of crappy, high expense mutual funds out there, but the crappy funds are relatively easy to spot. In fact, Morningstar.com analysts will tell you the the one area of finance that average people are pretty good at is picking better than average funds. The problems come in because people don't hold onto them or add money to them when times are bad...instead they buy when funds are high and sell when they are low. But this is a problem with index funds, too. If you compare the numerical average mutual fund with the asset weighted average, the results are different. The assets are more heavily weighted toward the better performing, lower expense funds.
It is not that hard to pick a decent actively managed fund. If you do nothing more than just pick a fund with below average expenses and hold onto it for a decade or more, your chances of beating the S&P 500 go up significantly. There are plenty of such funds out there:
And these are just the ones I can think of off the top of my head.
None of this is to say indexing is the wrong choice. You'll get the market average returns, which is better than most people do, and you'll beat the market average if you put extra money in an index fund when the market is down. But it's not an either/or, all or nothing scenario. It's possible to index part of your portfolio and to have part of it in actively managed funds.
Last edited by mysticaltyger; 02-02-2013 at 02:46 PM..
No one I know (certainly not me) put all his/her money in the SP 500 index on March 23, 2000 and added nothing over the next 13 years. Most people bought shares over these 13 years as the SP 500 crashed, recovered, crashed, and recovered again. So they bought expensive shares and super cheap ones. Then there's also the matter of dividends which the investor got paid with which added to total returns. And most importantly, no one really just invested ONLY in the SP 500 and nothing else. They (if they were somewhat knowledgeable) also had small cap stocks, foreign stocks, Reits, bonds, commodities. Anyone who had a diversified portfolio should have done well over the last 13 years, despite all the doom and gloom.
No one I know (certainly not me) put all his/her money in the SP 500 index on March 23, 2000 and added nothing over the next 13 years. Most people bought shares over these 13 years as the SP 500 crashed, recovered, crashed, and recovered again. So they bought expensive shares and super cheap ones. Then there's also the matter of dividends which the investor got paid with which added to total returns. And most importantly, no one really just invested ONLY in the SP 500 and nothing else. They (if they were somewhat knowledgeable) also had small cap stocks, foreign stocks, Reits, bonds, commodities. Anyone who had a diversified portfolio should have done well over the last 13 years, despite all the doom and gloom.
What I find interesting in threads like this in which posters reveal things about themselves without realizing it. You speak either from research or experience with having invested over the time period. Others would seem to be saying they made big mistakes or never did invest per the topic to begin with.
Let me share a thought with everyone. The March 2000 S&P high was based on what I call funny money. A run up in valuations based on unrealistic investment expectations. Unless one pulled there money out then it was not really there other than on paper. So what was loss was a paper loss. Much like the housing market. If you really thought your house in 2006 was worth all that money you were mistaking paper/funny money for real money as the appreciation in the recent years before that were unrealistic. The market has had a great run up and if I want what I now have to be real money I need to pull it out. Until I do it is only funny money that is on paper and thats about it. So a 10% correction should not be something a person crys about as it is just your funny money finding a proper level for longer term valuation.
What I find interesting in threads like this in which posters reveal things about themselves without realizing it. You speak either from research or experience with having invested over the time period. Others would seem to be saying they made big mistakes or never did invest per the topic to begin with.
The only scenario where someone who invested in the SP 500 and lost money over the last 13 years is if the person bought at the very peak using all his money and bought nothing else subsequently. Then the person did not receive any dividends at all. Such a person may not even exist.
no one here ever expects to buy a stock at the low or sell a stock at the high yet when it comes to these stupid index comparisons that is just what we do.
why should the highest point be your reference on a stock ? it is not. no one says i bought google at 100 and sold it at 600 but it was a crappy stock because it was once 800.
so why should it be your reference on the fund? did you expect to catch the exact high?
No one I know (certainly not me) put all his/her money in the SP 500 index on March 23, 2000 and added nothing over the next 13 years. Most people bought shares over these 13 years as the SP 500 crashed, recovered, crashed, and recovered again. So they bought expensive shares and super cheap ones. Then there's also the matter of dividends which the investor got paid with which added to total returns. And most importantly, no one really just invested ONLY in the SP 500 and nothing else. They (if they were somewhat knowledgeable) also had small cap stocks, foreign stocks, Reits, bonds, commodities. Anyone who had a diversified portfolio should have done well over the last 13 years, despite all the doom and gloom.
I believe this is spot on. I started investing in the stock market back in the mid-90s when I landed my first real job out of college. I've been adding on funds regularly ever since then through thick and thin, upturns, downturns and all. This kind of thing probably describes how a good percentage of people have been investing, except for those who completely bailed during the downturns.
For any Fidelity investors out there I am starting in limited amounts to buy select portfolio funds again. Already had Construction and Housing and will be getting Industrials and IT Services. They are sorta what I call off the reservation but I am entering a stage where I can do that again.
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