Yes, time is money and the dollars you made (or lost) on investments during the last year versus, say, over the course of the decade, is worth considering. Some of it is relative of course, because, as someone once said, “there are decades when nothing happens, and there are weeks when decades happen.” As it happens, David Ning writes in an interesting usnews.com piece, the last 10 years have been good indeed for investors, many of whom “have benefitted from low inflation and low cost investment products.”
Ning writes: “There are plenty of reasonable investment fears you might have, especially in the wake of the recession. There could be another stock market crash. The bond bubble might burst. You could spend down your assets too quickly in retirement. But modern investors actually have it pretty good.” In the first of two blogs drawn from the article, Ning details “how investors have come out ahead over the past decade.”
“Inflation has been almost nonexistent. Experts have been predicting high inflation for years, but inflation is still extremely low. I remember a time when gas was over $5 a gallon, but I just filled up and paid more like $4. That’s a hundred bucks every month that I’m able to save. Inflation hasn’t been eating away at the spending power of savers as much as it has at times in the past.
“The low yield environment isn’t as bad as it seems. It would certainly help savers if the yield on safe investments would move back closer to the historical average, but the difference isn’t as extreme as you might think. The average 10-year Treasury rate since 1871 is roughly 4.6 percent. Yes, it’s now over 2 percent lower, but remember that the average is skewed due to the extremely high interest rates of the 70s and 80s. Take the super high rates out and the average is in the 3 percent range, which is about where interest rates were at the start of the year. While interest rates are below average, most people are still earning something on their safe investments.
“You made a killing in bonds the last few years. Those who needed to sell bonds in the last few years likely did well when bond prices rallied. Even though bonds dipped in the past year, many funds did well over the long term. For example, the 3-year return on the Vanguard Long-Term Treasury Fund Admiral Shares was 8 percent or more annually, including the past 12 months. A $10,000 investment in this fund three years ago became approximately $12,650 at the end of April. Not bad for an investment that’s primarily there to reduce portfolio volatility. I’m not recommending a long-term bond fund for everybody, because a portfolio should be tailored for each person’s own situation. But bond portfolios have produced respectable returns for many investors over the past several years.”