Last week marked the 10th anniversary of the Lehman Brothers bankruptcy on October 15th, 2008. That was the straw that broke the camel’s back and what caused massive selloffs in investments of all kinds and the unofficial start of the financial meltdown from Wall Street to home owners. Eventually, it ended up wiping out three trillion dollars of wealth. Of the biggest investment firms failing kind of made the meltdown official.
At this depth of the meltdown, vast numbers of investors took their money out of the market. Yet, if you had invested in the Standard and Poor 500 – which is a basket of the largest 500 corporations, on the day before Lehman Brothers went bankrupt, you would today have a return of 11% per year for the last decade.
I talk about investing, in basic terms, a couple of times a year, and it never fails that I get two or three emails that using a 10% return isn’t reasonable. Or the question is where to get that kind of return. Well – here is proof once again. At the worst day since the great depression, it once again paid to invest and not pull your saving out. Yes, an 11% average annual return for the last decade. THAT is a long enough time period to be a fair measurement. If you want to go back over 50 years, the S&P return is still over 10%.
Do the research for five minutes and your own due diligence, but anyone under age 40 or so doesn’t need complex investing advice. They’re 20 or more years from retirement and can ride out three or four more cycles. Nothing could be better for someone in their 20s than to have their money in the S&P. It’s diversified because it’s 500 companies around the globe, it doesn’t need management fees or a broker and has a 50 plus year proven track record. I’m not sure what else anyone would need.
By the way, for anyone older than their 40s, a so-called 60-40 portfolio of 60% stocks and 40% bonds bought the day before the great meltdown would have been an 8% return on this 10th anniversary.
Time heals all investments. When the market corrects, lots of people panic, instead of seeing it as a temporary setback that has more upside than downside. No, you won’t more than maybe 5% this year. No, you won’t be down like you were in 2008, or up more than 25% as was the case a couple of years ago. If you’re not invested for the longer term of more than five years – stay away. If you’re needing to be up on a weekly basis – stay away. For the rest of the world, set it and forget it. Don’t even open your statements more than once a years. You’ll be happy you did….
George Boelcke – Money Tools & Rules book – yourmoneybook.com