Analyste de Boston

Gone Nowhere in 8 Years

Yes, dividends reinvested AND inflation-adjusted return. Subtract any trading & portfolio costs and consider survivorship bias (if you were holding the component stocks) - what have you really lost?

For the DIA, the 10 Yr TOTAL Return is 5.91% (0.58% annualized), that's probably been the cheapest index choice.

It's CONSIDERABLE WORSE for investors in S&P500 index mutual funds: 10 Yr TOTAL Return for the Vanguard 500 Index Inv (VFINX) is -8.5% (-0.88% ann.) ; Fidelity Spartan 500 Index Inv (FSMKX) is -8.54%; etc. Higher fees = greater negative return.

Meanwhile, 2000-2008 inflation was 25.1% (2.26% ann.)

From today forward, JUST TO BREAK EVEN the average US market index investment needs a +40% TR on an inflation-adjusted basis. (Taxes not considered!) OVER INFLATION, that's +3.2% avg. ann. return for the next ten years, +6.5% for the next five years or +11% for the next 3 years. Just to break even!

Playing catch-up forces equity investors further out on the risk-return curve. Beyond the Dollar's inflation, taxes, liabilities and any economic dysfunction in the near term, this reality should make a higher allocation to Emerging Mkts and alternative investments even more appealing.