Investing Lessons From The Lost Decade
Past performance does not guarantee future results. Diversification does not protect against loss. Source: Lipper. In the graph shown in the video, U.S. Stocks are represented by the S&P 500 Index. The Moderate Portfolio is based on 45% in Russell 3000 Index (U.S. Large-, Mid-, and Small-Cap Stocks), 40% in Barclays Capital U.S. Aggregate Bond Index (U.S. Bonds), 10% MSCI EAFE Index (Foreign Stocks), and 5% MSCI Emerging Markets Index (Emerging Markets Stocks). The Moderate Growth Portfolio is made of 50% Russell 3000 Index (U.S. Large-, Mid-, and Small-Cap Stocks), 20% Barclays Capital U.S. Aggregate Bond Index (U.S. Bonds), 20% MSCI EAFE Index (Foreign Stocks), and 10% MSCI Emerging Markets Index (Emerging Markets Stocks). Indices are unmanaged and you cannot invest directly in an index. The returns shown in the video include reinvestment of dividends and capital gain with rebalancing occurring on December 31 of each year. Different time periods may produce different results. The examples in the video are hypothetical.
From 2000 to 2009, a time period many have referred to as the 'Lost Decade', U.S. Stocks (as measured by the S&P 500 Index) failed to provide positive returns for investors. However, that doesn't mean investing in the capital markets wasn't worthwhile then or now.
For those who stuck to a few time-tested strategies -- such as diversification, investing regularly and rebalancing -- the Lost Decade did product some positive returns.