The Total Return Roller Coaster: An Updated Look
Doug Short | Apr 20, 2014 01:00AM ET
Note from dshort: I received a recent email requesting an update to my Total Return Roller Coaster series. I've now updated the charts below based on monthly data through the March close.
Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles.
Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation?
The purchasing power of your investment has increased to $26,567 for an annualized real return of 19.70%.
As these charts illustrate, and as many households have discovered during the 21st century so far, investing in equities carries substantial risk. Households approaching retirement should understand this risk and make rational decisions about diversification. In the past I've suggested that they should also consider fixed income alternatives for that part of the nest egg that will pay non-discretionary expenses not covered by Social Security and pensions. Unfortunately this traditional wisdom has been less helpful in recent years owing to the Fed Zero Interest Rate Policy (ZIRP) and various stimulus strategies, which have collectively shrunk interest rates.
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