The benchmark index known as the S&P 500 hit a value of 1362.80 in April, 1999. But in mid 2008, this important measure of overall stock market performance was actually lower than it was in early 1999. Yes, there were a few good years in that nine year period, but the market always got wiped out right afterwards. For example, the S&P 500 hit a new high point in March, 2000 but then went on to lose 50% of its value by October, 2002. The Nasdaq lost 80% of its value during that period, and overall the stock market lost around $9 trillion dollars in this downturn. The market improved after this, but then from October, 2007 to July of 2008 the S&P 500 (and the Dow and Nasdaq) lost another 20%+, making investors worse off (for a second time!) than they were more than nine years earlier in 1999. To have earned a moderate annual stock market return of 10% by 2008, you would have needed to hold the right stocks or funds for 19 continuous years. Any shorter time or any less than perfect stock/fund picking would have left you with lower returns, likely much lower.

The big returns you hear about in the market are only theoretically achievable. For average investors in the real world, big returns almost never happen. Even with the best of advice, research and planning, timing is a huge issue which overrides all that expertise and planning. Over and over investors get in or out of the market at the wrong time, such as getting in shortly before a big market drop or getting out shortly before a big run up. Just one of these mistakes can ruin up to twenty years worth of gains. Or just as bad, poor timing gets investors caught in a decade or two of a market which just goes sideways.

You might consider nine or ten years to be "long term investing", and according to the experts if you stay invested in the stock market for a term of ten years or so you are virtually assured of at least moderate gains or returns (matching what is called a "benchmark"), of perhaps 10% to 12% annually. But a study reported in The Hulbert Financial Digest in April, 2008 illustrated that decade long stock market debacles happen fairly often. The study demonstrated that in order to reasonably assure yourself of stock market returns which will beat the low interest rate on T-Bills (about 3% per year over the last decade), you have to invest in a portfolio of some combination of stocks, mutual funds and bonds and keep that same portfolio for 20 to 30 years. Then maybe you will have beaten T-Bills. But even then you will only beat T-Bills if you were lucky enough to pick investments that turned in a good performance. Unfortunately, if you weren't lucky enough with your portfolio, after 20 or 30 years you don't have time left in your life to turn things around.

To retire with the lifestyle you would like, you probably need to withdraw about 6% or more of your remaining savings each year, after taxes. To keep that up throughout retirement you need to earn a rate of return of around 8% on your savings (to be able to pay the taxes and have 6% left). The problem with that plan: "The 8% average growth rate doesn't exist...You could have the bad luck to retire into 20 years of sideways stock market performance (or even ten years -- AE-Trust), as happened from 1964 to 1982 (or from 1999 to 2008 -- AE-Trust)...a person who retires at age 65 and begins withdrawing 6% a year from a nest egg of 40% stocks and 60% bonds has only about a 22% chance of having any money left at age 95." (Article: How To Bulletproof Your Nest Egg; Wall Street Journal weekend edition, June 14-15, 2008)

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