20 year bear market?

[scorpioncapital]

In 2000, the S&P was 1500. The current decline has been 50%. That means we need a 100% gain to get back to 1500. If the market now returns 2x the average, say 10% per year, it will take 10 years to get back to 1500 - 2020 is almost exactly 20 years.

[Parsad]

If the market now returns 2x the average, say 10% per year, it will take 10 years to get back to 1500 - 2020 is almost exactly 20 years.

 

Dude, without a calculator...the rule of 72.  72 divided by 10% equals 7.2 years.  Thus 2016 is when you should get back to 1500.  But you are pretty close.  The S&P500 hit a 12-year low last month, so add 7.2 years and you get pretty close to 20 years.  Remember though that the market does not move in a linear fashion.  Cheers!

[arbitragr]

WEB was pretty much spot on re; returns for stocks in that Fortune article after the tech bubble ... 6-7 years after the fact.

[scorpioncapital]

Good point I guess I forgot the power of compounding. I guess dividends might accelerate this timeline somewhat as might above average inflation.

[uncommonprofits]

Good point I guess I forgot the power of compounding. I guess dividends might accelerate this timeline somewhat as might above average inflation.

 

Dividends are not over and above -- they are factored into the index.

[scorpioncapital]

I just can't get it right :)

[ericd1]

If you invest in a 2x leveraged index ETF you could double your returns and get their in half the time.

 

Or, what about a 3x?  1/3 the time?    Possible?  Prudent? 

 

Let me pose a question - If you believe equities are poised to return 10%+ annually over the next 7-10 years) would you consider holding a 2x leveraged index for the long term? 

 

 

[benhacker]

I think anyone holding a leveraged etf at all can't do math.

 

If you think you get 20% over 1 year if the market does 10% with a leveraged 2x ETF, you are sadly mistaken.

 

Take a stroll through the past performance of leveraged etfs over various time frames... also peruse their taxable distributions and their efficiency.

 

These things are totally toxic, but people love to play short term moves, and they do work for that.

 

Ben

[Uccmal]

Too true, Buy twice as much of the ETF or leverage it yourself through calls. 

 

If you think you get 20% over 1 year if the market does 10% with a leveraged 2x ETF, you are sadly mistaken.

 

Take a stroll through the past performance of leveraged etfs over various time frames... also peruse their taxable distributions and their efficiency.

[arbitragr]

Leveraged ETFs kill portfolios;

 

http://news.morningstar.com/articlenet/article.aspx?id=271892

[scorpioncapital]

If you invest in a 2x leveraged index ETF you could double your returns and get their in half the time.

 

Or, what about a 3x?   1/3 the time?    Possible?  Prudent? 

 

Let me pose a question - If you believe equities are poised to return 10%+ annually over the next 7-10 years) would you consider holding a 2x leveraged index for the long term? 

 

 

 

Not 2x, but 1.33x sure. I'd be comfortable with 35% leverage, but why do it with an ETF? I would rather do it with Berkshire stock. Here you have a company that is very likely to outperform the index by a few points.

[Viking]

Back in 1999-2000 the optomism was surreal. I still remember reading the Globe &Mail in Starbucks in Toronto in 2000. They had a feature article on Nortel and a full page graph of the stock price which at the time was over $120 and I think it accounted for 1/3 of the TSX market cap.

 

Fast forward to today. Sadly Nortel is going out of business. Lots of good lessons have been given by the market. Bottom line, value investors stand a much better chance of realizing a much better return over the next 8-10 years!

 

From this point in time, I wonder what lessons will given by Mr. Market over the next 5 years or so...