thoughts on the 20 year investing horizon

THE THRIFT SAVINGS PLAN ALLOCATION GUIDE Forums Message Board thoughts on the 20 year investing horizon

This topic contains 4 replies, has 1 voice, and was last updated by  Brian 3 years, 2 months ago.

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  • #17254

    claude moore

    nytimes image

    just wondering if anyone had thoughts on this nytimes graphic from 2011.

    http://graphics8.nytimes.com/packages/images/newsgraphics/2011/0102-metrics/triangle.png

    In Investing, It’s When You Start
    And When You Finish

    The Standard & Poor’s 500-stock index has posted double-digit gains for the second year in a row. But the index is still below where it was in early 1999.

    So what is the proper perspective?

    Ed Easterling, who runs an investment management and research firm from Corvallis, Oregon, faced similar questions a decade ago. In the summer of 2001, Mr. Easterling had a debate with a client about whether investors should expect to achieve long-term average returns in the future.

    At the time, the average individual investor expected that the stock market would return about 10 percent a year over the next 10 to 20 years — or about 7 percent after inflation — according to surveys by the University of Michigan’s Survey Research Center, as well as UBS and Gallup.
    But historical averages can vary widely depending on their starting and ending points. For example, averages that start before the 1929 crash are substantially different from those that start after it, and Mr. Easterling felt that choosing a single date was arbitrary. In response, he created the chart above, which shows annualized returns based on thousands of possible combinations of market entry and exit.

    After accounting for dividends, inflation, taxes and fees, $10,000 invested at the end of 1961 would have shrunk to $6,600 by 1981. From the end of 1979 to 1999, $10,000 would have grown to $48,000.

    “Market returns are more volatile than most people realize,” Mr. Easterling said, “even over periods as long as 20 years.”

    #17255

    claude moore
    #17266

    Joe Warner

    Invest. Pick and allocation of C and S funds, G, I, and F.
    Keep the allocation the same for the 20 years. Keep investing a fixed percentage of your salary.

    There was a scholarly paper that looked military officers that could invest in the TSP equivalent. The article went through many monte-carlo simulations and actual performance of the market beginning in the late 1980s. Their findings was to the largest percentages in C and S and smaller in G, I and F. With the allocations based on different risk levels of the individuals. In each case, it was best to never rebalance the funds. It gave the most return. If you think about it for a moment, why take money out of a fund that is doing better than another fund and put it into a worse performing fund just for the sake of keeping a conventional wisdom for risk level allocation.

    #17268

    LC

    Do you have a link for that?

    #17547

    Brian

    I would like to see the link also.

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