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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76392  
Subject: Re: Bonds Date: 4/19/2004 2:22 PM
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2. Was this number the result of cherry picking a date range where stocks shown? Does it include the 2000-2002 period when stocks dropped by 50%?

Nick


If anybody is guilty of cherrypicking returns, it's you (or cherrypicking indexes, like the NASDAQ, when it suits you, even though no one is recommending investing solely in the NASDAQ). For example, despite the stock drop, you fail to mention that the compound annual return for the S&P 500 for the 5-year period ending 3/31/04 is -1.20%, which is hardly catastrophic, especially if one were to take my advice, where I suggested not investing money you will need within 5 years in the stock market.

You also fail to point out that people almost never invest *all* their money precisely at a market peak, so investors in the stock market will enjoy superior returns as stocks climb to a peak, after which returns will be disappointing. However, long-run returns averaged over the bull market and bear market will still generally be pretty good. For the 10 years ending 3/31/04, the compound annual return for the S&P 500 was 11.68%, which I feel is more than adequate, and this despite lackluster returns over the last 5 years.

You seem very concerned about risk, but I think you neglect to consider the risk that a portfolio will not have a positive real (i.e. inflation -adjusted) after-tax return -- i.e. the risk that you will lose purchasing power over the long-run. Stocks give you the greatest probability of staying ahead of inflation, especially after taxes, over the long run.
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