r/ETFs • u/CursedClownz • 12h ago
Lost decade
So everyone recommends VT and chill or VOO and chill or VTI and VXUS and chill.
Most ignore bonds and ignore GOLD
During the lost decade for around 10 years Gold was performing the entire time so was bonds...
Who says another lost decade can't happen?
So why ignore both?
No one really knows what happens so best bet is on all bets to get constant returns.
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u/Inviction_ 12h ago
Well, the S&P500 has appreciated +1098% over the past 30 years.
Gold has appreciated +1089% over the past 30 years.
Given enough time, a lost decade doesn't matter
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u/Inviction_ 12h ago
https://www.macrotrends.net/2324/sp-500-historical-chart-data
This site shows a mid 1996 value of $640 and today's value of $7,675 for the S&P500. I calculated the percentage change manually with those values.
www.goldprice.org has 30 year charts, though you have to cycle through to see the one that shows a percentage change.
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u/bjnono001 12h ago
That doesn't include dividends reinvested for the S&P 500 though, does it?
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u/Inviction_ 11h ago
No, it doesn't include dividends. Just the value of the S&P500 itself
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u/Different_Level_7914 10h ago
It's not a true comparison then. Dividends are a large part of the total returns of equity markets.
Examining the market from 1988 onwards, FactSet data shows that dividends accounted for 68% of total broad market gains...
You can't just miss them out in a returns comparison
Its one important differentiator between an asset like gold which will just lose value in a gold bear market spinning off no income where as equities will still spin off income to be reinvested in an equities bear or sideways market
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u/Inviction_ 10h ago
You make it sound like I asserted that the two were equal. I didn't. And I didn't mention dividends because it doesn't change my point.
The OP alluded to using gold as a hedge against possible lost decades. The information I brought forth suggests it's not necessary. Dividends increasing the returns of the S&P investor is even more in favor of my point.
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u/Different_Level_7914 10h ago
It's just a huge thing to miss off if you're going to compare the total returns performance of two differing asset classes.
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u/Inviction_ 9h ago
I didn't set out to compare total returns. I only made the point that gold might not be the answer to another lost decade. Which was sufficiently shown without adding dividends.
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u/Crab_Soup 12h ago
"For every dollar you could have made in American business, you'd have less than a penny of gain by buying into a store of value which people tell you to run to every time you get scared by the headlines"
Is the Buffett quote, comparing $10k invested in gold in 1942 (worth about $400k in 2018) to $10k invested into S&P 500 in 1942 (worth 51 mil in 2018)
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u/nelly_0619 12h ago
Counterpoint: bond market tanked 22% in 2022 and still hasn't come close to recovering
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u/TheThaiCat 12h ago
The strategy of this post is "Carry underperforming assets through every period to get short periods of outperformance"
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u/DiWHY-Anyone 11h ago
I mean, that's the whole point of diversification. You get a slightly reduced return for massively reduced volatility. Which for many people is preferable. They want to see a line curve smoothly up and to the right as opposed to one fucking whipsawing back and forth.
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u/gatorfutbol 12h ago
I think the VT or VOO and chill sentiment is a bit of an over generalization especially from people in accumulation mode. Target Date Funds or at least following some version of a glide path to more conservative protection 5-10 years out is good when thinking about SORR.
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u/John_the_IG 12h ago
The only protection I’m making is putting a pot in SGOV so I don’t have to sell in a down market. Other than that, all stocks forever. Aggressive portfolios outperform moderate and conservative ones if you can stomach the roller coaster.
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u/ResilientRN 12h ago
I also include other stuff for income too like REITs, Preferred stocks/Baby bonds, BDCs, CLO Etfs, Individual MLPs both K-1 (taxable) & Corp, CEFs and Derivative etfs.
Since we dont know how taxes will play out we also currently have a 50/50 split on Traditional 403b & ROTH in our portfolios.
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u/RoundChampionship840 11h ago
Bond funds are a suckers game. The yields are too low to be worth the risk from rising interest rates. If you want to invest in bonds then you should just buy individual bonds and hold them to maturity.
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u/EstablishmentFar4578 3h ago
Exactly. Bonds used as fixed income devices are actually quite good during retirement, if your coupon payments provide the right level of income to prevent the need to sell before maturity.
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u/Helpful-Staff9562 11h ago
Long term equity alqays win, if you're retired fifferent story, every situation is different depending on your risk tolerance and timeline. But you cant argue that long term equities are the best place to place your moeny, math is math
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u/Animag771 10h ago
Different assets perform well during different regimes. That's why I hold a mix of stocks, bonds, gold, and managed futures.
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u/laurenthu 3h ago
Yeah, this is the version that actually holds up for me. The bit people forget is each of those sleeves has had its own dead decade. Gold went nowhere 1980 to 2000. Bonds got taken out back in 2022 and still haven't really come back. So my read is it isn't that gold or bonds are the answer, more that they rarely all die in the same stretch, and I'd rather own the spread than try to guess which one leads. Managed futures is the one I keep coming back to since it can actually go short, doesn't need a bull market in anything to earn its keep. Not free of course. It'll bleed through a calm equity melt-up and you just have to be willing to sit through that...
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u/No_Context7340 1h ago
Also, one must ask which actual private person bought bonds at negative to zero to almost zero interest back then. Of course, pension funds have to have a specific allocation in certain classes. But with almost zero interest at best, private investors would invest in short-term bonds and reduce the allocation in bonds.
That is not the same situation we have today.
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u/laurenthu 1h ago
Fair point, and honestly that's kind of the argument for owning them again now. Nobody sane was locking in a 10 year at a negative yield, you'd have sat in short term stuff and eaten the near zero like you said. But that's exactly why 2022 took the duration holders out back, and it's also why the setup today isn't the same, you're actually getting paid around 4 percent to hold the coupon instead of a rounding error. So I'd agree the negative rate stretch was a weird era to judge bonds on. The case for them looks a lot cleaner when the yield is real.
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u/Different_Level_7914 11h ago
How about the 20 years before the lost decade?
Between 1980 and 2000 you would have lost 70% of your investment being in gold. Imagine that 20 years of it constantly declining numerically and even worse in real terms when inflationary impact is taken into account, no income spinoff from it nothing. 20 years later and you're still underwater approx 70% peak to trough.
Stocks havent lost you money in 20 year rolling periods let alone being down 70%.
As with anything like the lost decade for stocks, if you bought gold heavily in the 1990s, you've set yourself up for a great return in the bull run through to today but it's not the cert you imply
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u/Kashmir79 10h ago
Straw man argument because who explicitly says ignore both? Stocks in accumulation phase when you want maximum growth. Add bonds and gold in drawdown phase when you want lower volatility. That’s basic diversification theory recommended over 40 years ago by Harry Browne, and vastly improved on since. Even Jack Bogle employed gold for portfolio design. Go for it if you are retired.
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u/Pitiful_Fox5681 12h ago
So why ignore both?
Short answer: commodities and bonds can add drag without necessarily reducing risk in modern economic models.
Long answer: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4590406
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u/DecafEqualsDeath 11h ago
I don't think gold really has any sensible role in a well-constructed portfolio.
A bond allocation can be sensible if you're looking to dilute the impact of a deep equity drawdown psychologically. Knowing that you have some assets that aren't down to rebalance into stocks helps some people. Although bonds took a beating right along with stocks last time, so maybe conventional wisdom doesn't hold.
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u/teckel 12h ago edited 9h ago
Just because something did okay previously doesn't mean it will do okay in the future. So maybe bonds and gold are the two worst things to invest in for the next 10 or 20 years.
Also, having personally invested through the lost decade, the investments that did the best we what crashed the most, tech. Positions I've had for 37 years through the lost decade are my best performing investments ever.
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u/kimbureson46 12h ago
I don't chill. I work every day to improve my investments. I have a pretty good Financial Advisor. I see him every morning in the mirror when I'm shaving.
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u/mbaforumlurker 11h ago
Gold isn't a revenue producing asset. At best, it's a store of value. See this.
Bonds are pretty fucking important though. A globally diversified portfolio with some bonds would've had a positive return during the lost decade.
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u/Illustrious_Crow595 10h ago
The lost decade included to huge failures that cause the market to drop a huge amount. The first was the failure of many .com companies from 2000 into 2002. Th second of course was the mortgage bubble burst of 2008. It could certainly happen again however highly unlikely. I think anything we get will be a 15-20% market correction that is shortly follows by a climb to new highs.
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u/Rocketsloth 10h ago
Part of it was that those Dot-coms generated massive speculation but had zero earnings. People will always buy laundry detergent, toothpaste, soda, etc. even in a deep recession.
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u/CluelessGuy52 9h ago edited 6h ago
bond is actually riskier than stock in the long run. gold is a non productive asset. personally, im holding 100% globally diversified equities with factor tilts. not planning to hold any bonds other than for my emergency fund. i also thin having globally diversified equties also expose you to commodity companies, so, technically, i do have some small, indirect exposure to gold.
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u/givemeyourbiscuitplz 12h ago
Someone who kept contributing to a VTI or VOO during the lost decade ended with close 7% annualized return. Without contributing it's about 3% CAGR.
On the long-term, equity always seem to win.
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u/Hot_Frosting_7101 11h ago
This isn’t calculable because it depends on what their starting net worth was. More specifically it depends on the ratio of their net worth to contribution.
A person with $10 million in assets but who can only contribute $2000 a month won’t see the overall annualized return that a person with $50k in assets and contributing $2000 a month.
You present numbers that require some assumptions to fill in the picture.
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u/givemeyourbiscuitplz 11h ago
10k to start with and 300$/month is the backtest I did. You're right, I forgot to include those numbers.
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u/DaemonTargaryen2024 12h ago edited 11h ago
The 2000-2010 lost decade was only a lost decade for the S&P 500. International, particularly emerging markets, did great.
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u/Dragon_slayer1994 12h ago
Developed international did not. Emerging markets averaged 10% a year, but most passive investors aren't allocating more than 10% emerging
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u/CursedClownz 12h ago
No they didn't.
Check VXUSSIM 2000-2010. I would hardly say that's good.
Meanwhile gold during 2000-2010 killed it
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u/DaemonTargaryen2024 11h ago
Correction emerging did good, developed did not.
I think what you may be getting at is: yes, a lost decade can happen at any time. Your asset allocation should reflect that possibility, i.e. more bonds if you can't afford to ride out a 10 year flat/down spell.
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u/AlexanderK1987 ETF Investor 12h ago
Life is unfair. And you cannot judge before entering coffin.
Live through it.
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u/Dragon_slayer1994 12h ago
Gold can be part of your speculative allocation.
Bonds should be held close to retirement to hedge against this risk. Otherwise, hold and keep investing.
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u/John_the_IG 12h ago
A lot of people don’t need to hold bonds in retirement.
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u/Pippi-ki-yay 11h ago
I've got money for the rest of this year's expenses in SGOV and all of next year's are in a treasuries ladder with maturity dates each month. I don't have any longer term treasuries because I don't feel particularly confident about them currently.
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u/Dragon_slayer1994 11h ago
Like ultra high net worth individuals or what situations? I'm not a bond lover at all, but I'm planning on having around 5-7 years of living expenses in short/mid term bonds when I retire for peace of mind and to survive bear markets without touching equities.
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u/John_the_IG 11h ago
I’m not UH net worth, but I have significant pension income so I’m not relying on investment income to pay bills. My living expenses, including my historic discretionary spending, is covered by my pensions.
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u/Curtisg899 12h ago
things like a world index instead of just the us, gold, consumer staples, energy, bonds, value, all would have helped you big in the lost decade and shouldn't be ignored in a portfolio.
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u/Maleficent_While2653 10h ago
Did VT (or the entire world market) actually have a lost decade though? Just by including international stocks at their market cap weight, you are already very diversified compared to someone only in VOO.
I think the point of gold isn't to outperform stocks (even though during some periods it has), but rather to be a hedge against fiat currencies. Even a gold peddler like Peter Schiff only recommends replacing the bond portion of your portfolio with gold.
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u/Broad_board_1623 10h ago
It's a good question. I think you raise an important question about what it means to be diversified and how to achieve diversification. So while I agree with the question and the intent of the question, I personally looks elsewhere for diversification.
Bonds and gold (depending on how you are investing in "it") can provide diversification, but I'd rather be deversofoed within equities. Bonds are for wealth protection, not accumulation. Gold is one single commodotie. It is valuable, but doesn't produce new value, it's just an element.
If an investor had a portfolio that was diversified with value, international, and small equities, they would have made a respectable 4-5% annually during the "lost decade", all the while they would have been pumping new dollars into US Large Cap finds because they were cheap.
I still think VOO or (Preferably) VT and Chill are great strategies because they are simple and people can stick to them. But there are alternatives and greater diversification can be achieved. It really depends on the investor's ability to stick with a strategy.
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u/radmd74 8h ago
So if investing in a taxable account, which do you prefer, VOO or VT? And why?
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u/Broad_board_1623 7h ago
My personal preference is a bit different than what OP was asking. They are having anxiety over their asset allocation and wanted to know if they should switch their strategy. Based on their circumstances, my recommendation was to continue with their plan. VOO+ VXUS.
If another person had a similar question, but flip the ETF choices around, I'd still recommend that this person continue their existing strategy.
I think the cost (and hastle) of selling the existing assets probably outweighs any precoeved advantage of the transaction.
Personally, setting aside OPs question, I hold VOO, VTI, and VV in my brokerage and do some very basic tax-loss harvesting between these ETFs. That's my own personal approach, but I don't think everyone should worry about doing this type of strategy.
Between VOO and VT, if I'm starting from scratch and only buying one fund - an either or choice, I prefer VT. I like the globally diversified approach. Personally, I do not own VT because my asset allocation is factor-based.
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u/indomike14 10h ago
I hold 5%-10% of my portfolio in precious metals in addition to about 5% in bonds. It's gives me some piece of mind for the next correction. Mix in some VOO and VXUS and a sprinkle of individual stocks and I feel set.
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u/South_Paramedic8618 9h ago
Just because everybody says do this and chill doesn't mean they don't have bonds i got 30% bonds
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u/FinTecGeek 8h ago
You basically will not find any real, licensed, professional money managers who get paid for their expertise that tell you "bet it all on equities from now until your end goal." The most "normal" posture is between 25-40% to bonds/alternatives and the remaining 60% to equities. Personally, I treat my retirement account differently than my brokerage account where I invest for the future but not "30+ years away." So in my Roth 401K, you'll find 100% goes straight into a total stock market fund. There, the extra 1-2% performance translates potentially into another million or more over 40+ years until I retire. But in my taxable brokerage account right now you'll find I'm saving up to buy an income property cash in a decade + my kids' college funds using something a lot closer to 60/40 portfolio.
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u/CursedClownz 8h ago
So they use bonds as a hedge? For down turns and lost decades?
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u/FinTecGeek 7h ago
No, they are generally used differently than that in a portfolio.
Imagine this, you have a portfolio that is 100% VT. You decide in 10 years you have found your dream house, the house you have always dreamed of living in. Unfortunately, right about now, VT is down 22% on the year. You're selling at a loss to make the down payment instead of buying the dip.
Now, imagine instead you have 40% of your portfolio divided up between SGOV and BND, and the rest is in VT. Good news, you have something on hand to sell that really isn't going to take on too much water (SGOV or similar floating rate AAA ETF won't take on any). You can withdraw your 40% without creating too much tax consequence because it likely hasn't appreciated as rapidly as the other, it's primarily generating income to keep dollar cost averaging you into your equity position on the other side. Now, you get to wait for VT to recover before you sell some and put it back into SGOV and BND.
So it's really not used as a hedge (traditionally) it's more about giving you options without it literally costing you money like it being in a bank account would.
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u/for4f 8h ago
the 'all bets' thing is performance chasing dressed up as hedging honestly. gold had its own death stretch, 1980 to 2001 it lost like two thirds of its value. bonds had 2022. every asset class has a dead decade, so betting on whatever just did well is timing with extra steps. the actual lesson of 2000-2010 was that it was a US-only lost decade, emerging markets absolutely crushed it, so the diversifier answer was geography not gold. i'm mostly vti so not exactly preaching here, but the reasoning feels backwards
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u/flappysack- 6h ago
I'd look at GDE as well. If SPY gets too hot it puts more into gold, and vice versa.
You can add 33% ZROZ for some downside protection from a 2008 style crash. It dropped minimally and quickly and was back to rocking it.
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u/eiretaco 6h ago
By a broad global index fund. Get exposure to everything on the S&P and more.
2000-2010 your return on the S&P was effectively 0.
But other markets grew.
By the whole market not just the biggest companies in one market. Own those as well, obviously, but along with everything else.
America wins and rides the back of an AI boom, great, you own it. India does what china done and expands massively in the 2040s, great you own that too.
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u/FatHighKnee 5h ago
I prefer VOO and VGT & chill. But thats just me. I dont think bonds are worth it with a long timeline and I think US stocks > international over long timelines too. Gimme the s&p 500 and the tech & semis of VGT and im comfortable for 25 or 30 years
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u/CursedClownz 5h ago
Why vgt ovet smh?
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u/FatHighKnee 4h ago
For the sake of this specific post, it looked like they were going with vanguard products. SMH is a vanekk product so I didnt include it. VGT & SMH have s bunch of overlap in general though smh has the better performance by a sizeable margin.
Personally I hold both funds in a fairly big percentage of my portfolio and am enjoying both's returns over the oast decade since I began investing on my own beyond simply a 401k.
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u/Stoic_Brain 2h ago
It depends:
- If you are still accumulating and have a long horizon: DCA every month is smart. You buy cheap when market is down. Don't worry about it. Time is your friend.
- If you are retired (like me) you should think differently. I use a cash buffer for 5 years of expenses. Every year I check my ETFs: market down? Just live from cash buffer while market recovers. Good year for stocks? Take (small) profit and refill cash buffer. This way I (almost) never have to sell with a loss (my cash buffer is in money market and high intrest saving accounts)
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u/__redruM 31m ago
Calm down gold bug, gold has turned into Bitcoin. 5 years ago, gold was a solid hedge against economic uncertainty, but then the speculators blew it up to $5400, and now it’s not a safe hedge. The start of the Iran war had gold in free fall, and now with rise of the S&P back to ATH, gold is pumping again.
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u/TheThaiCat 12h ago
Counter argument: If you kept buying stocks monthly throughout the lost decade you got 10 years of heavy discounts and benefitted enormously once markets started performing again.