I also put up a mental wall when I read (or sometimes hear friends discuss) the sorts of investment yields one should expect or plan for. These percentages are always significantly higher than anything I've seen. I put money into a 401(k), "diversifying" my funds, following the standard bits of advice, and I've never seen anything remotely approaching those claims.
A good deal of this is timing -- I started putting money away somewhat later than is ideal, and then came the dot.com bust, and September 11. Things started to look a little rosier, but then since last fall the drops I've seen have been precipitous. The wad of cash I keep on hand turns out to be a fine place to put my money -- and the fact that I tend to keep foreign cash around after trips overseas has been the best investment of my life (I have 100 euros I paid about 85 cents each for, and 100 pounds I paid about 1.50 each for).
Then this weekend, for the first time ever, I came across some actual numbers in Business section articles that made me think that I am not in fact crazy. Even these numbers were buried deep in articles on other topics, but they were reassuring to me nonetheless.
Sunday's Times included a column about stocks with dividend income. The article made this comparison:
...a $1000 investment in the (S.& P. 500) index on Dec. 31, 1999 would have fallen in value to $871 by the end of June this year, according to an analysis by T. Rowe Price in Baltimore. That's why many investors refer to the current period as the "lost decade", as equity investments have lost ground.
That's pretty much the time period I'm talking about, with my 401(k). And finally, after years of reading the Business section, I see for the first time a statement that coincides with my experience (although I've actually done a little better than that). Sure I've read about recent drops in the market, but I've never seen anything remotely approaching the actual admission that simple basic conservative investment in the stock market over the last ten years would have lost you money. And I can assure you that over this decade in question I have heard claims that you are stupid if you have anything less than 11 or 12 per cent returns on your investments . Ok, maybe the word "stupid" wasn't involved, but it felt as if that were so. (I did conclude a long time ago that when people speak of their investment returns they are usually speaking of their best years, the way the railroad companies and US government enticed settlers to the Dakotas by claiming rainfall averages that are only seen during the wettest times.)
And then I turned to my other Sunday paper, the Minneapolis Star Tribune. I read an article about how people are having to postpone their planned retirement these days. I've seen lots of those articles lately, but this one included this statistic:
Nationwide, the average American worker's 401(k) balance dropped to $64,000, down 7.5 percent in a year, according to an August report by Fidelity investments, which manages the accounts for 11.5 million participants. It would have been worse -- closer to the market's average 22 percent drop -- except that workers increased their average contributions by 7 percent, to $3,500 through the first half of this year, the Fidelity report noted.
Although my actual numbers are different, those percentages are certainly in line with what I've seen. Yes, of course I've read a great deal about the stock market's performance, but I haven't previously seen anything that laid out so starkly that my own depressing experience does not make me an outlier.
I don't know. Sometimes I think the point of business writers is to act as cheerleaders. Cheerleaders and scolds, sometimes in the same sentence.