The 2000’s Was the Worst Decade For Investors

August 6, 2014 5:16 PM

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The 2000’s Was the Worst Decade For Investors

What are the odds that had you bought the S&P 500 in the 1990’s, it would be higher twelve months later? It was all but guaranteed; any purchase made during this bull market had a 92% likelihood that you would have made money over the course of a year. Perhaps even more astonishing, the average change of +15.77% for the S&P 500 was the highest for any decade we’ve ever had! Think about that for a second, if you were to buy the S&P 500 any day in the 90’s, on average you would have made ~16% just twelve months later, pretty amazing.

In contrast, during the 2000’s, investors suffered through a lost decade. While the 90’s was the best time to be an investor, the 2000’s were the worst. The S&P 500 compounded annually at a loss of 2.7%. If you were to invest on any random day during the lost decade, the average return over the course of twelve months was -1.58%. To give you an idea of how bad this is, the only other period that can make a similar claim was the 1930’s, which returned -0.29% on average from a year earlier. Had you picked any day in the 2000’s, the chances you were higher one year later was just 56%, hardly better than a coin toss.

To put these numbers in context, looking at the data back to 1929, stocks are higher one year later 69% of the time with an average change of +7.58%.

So what might Milennials expect going forward? Let’s take a look at prior generations.

Baby boomers had a fantastic run investing in the 80’s and 90’s only to see their pre-retirement years burned by the lost decade. Their parents were less fortunate, enjoying good returns in the 50’s only to be left with feelings of nostalgia as the 60’s and 70’s can only be described as a period of max pain for investors. Baby Boomers’ Grandparents had an even tougher time; speculative fever ballooned in the 20’s only to be followed by two decades of virtually zero returns. 

Notice a pattern here?

Each subsequent generation has been blessed with better and better investing opportunities. Despite having just experienced the worst decade for investors, I am extremely bullish on the opportunities my generation has to grow our wealth in the stock market over the next twenty to thirty years.

Photo by Sander van der Wel

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