2000 was a terrible time to own stocks, but it’s a little late to sound the warning, isn’t it?

The decade was lost to buy-and-hold investors who followed the mainstream advice. It was not lost to investors who were conscious of valuation and bought low and sold high. It was not lost to investors who had the nerve and/or foresight to invest heavily in emerging markets, energy, or precious metals and mining. Of course whether the strategies that worked in the last decade will work in the new decade remains to be seen.

Everything in this post acts like buy and hold is the only way to invest.

Is it fair to say it was only a lost decade for investors using the classic buy and hold strategy?

What about other strategies?
What about strategies that including more selling during those 10 years?

TFB, I’m not too fond of your analysis in this post.

I don’t get much from the conclusion, other than your assertion that the decade was, in fact, lost.

Lost to whom, exactly? I assume the buy and hold investor, or the money market investor … not sure you give me much extra on that.

After reading it, I felt like I wasted my time, which is rare here.

Your recent article ‘Conventional Wisdom “Don’t Buy a Distribution” Is Wrong’ makes exactly that mistake.

A bad outcome does not necessarily invalidate the strategy. The two articles I commented on, however, attempted to deny the bad outcome in order to defend the strategy. That’s really not necessary. One should evaluate the merits of a strategy on its own and take into account its associated risks such as what would happen in a lost decade like the one we just experienced.

I think “lost” decade is meant to imply that were in the same place, financially, as we were in 2000. The problem with that thinking for those that have been regularly investing over the last ten years is they actually do have something to show for it. I’m not talking about a 3-point-something rate of return; I’m talking about owning a lot more shares than they would if the market climbed steadily through the decade. Whatever market pricing is 10 years from now, they will own a bigger piece of it because of the low returns of the last 10. It’s too soon to say the risk was or wasn’t rewarded; it may still be.

This is something hanging over my head. We maybe entering the post-abundance era. (See for example, the article by Michael T Klare). Issues like population aging, shortage of natural resources and the wildcard of climate change are showing their effect. It is not just a economic cycle. Our economy is just not growing any more.

In another two decades, many of us will be retiring. What if there is nothing to show after all? I’m very impressed by the intelligence of TFB and others. There are so much good advice for investment, so much good knowledge on the complex issues of accounting and taxation, and such a phenomenal grasp of probability and its application in finance. We are applying our best effort. But what if all these intelligence goes into to waste. And we have nothing to show in three decades? I mean we may be just living in a wrong era. All the money to be made may have already been made in the 90s and before. It is all downhill from here.

I’m not putting my money on these predictions. But they are plausible scenarios. I just want to take a break from number crunching and try to comtemplate a even bigger picture.