It Wasn't a Lost Decade for Everyone


Howard Gold Image Howard Gold Founder & President, GoldenEgg Investing

Never in the past 75 years did asset allocation remove the risk of investing."

Incidentally, Bennyhoff agrees with me that lump-sum investing has a clear edge over dollar-cost-averaging, as our little study showed. That only confirms some other research on the subject.

"The sooner you put your money at risk, the better," he says.

So, what about the next ten years? Would a 50/50 stock/bond split do as well as it has over the past decade?

Not likely. On January 1, 1999, the ten-year Treasury note yielded 4.65%, according to the Federal Reserve Bank of St. Louis. It hit 2.25% on December 31, 2008. With yields chopped by more than half, is it any wonder bonds rallied?

But according to Vanguard, when yields have been this low historically, that has "led to returns ranging from 1.3% to 2.9% annually over the next ten years."

Or, as Swensen put it, "We could well be at a point where investments in equities are going to produce returns.that are higher than what we've seen in the past five or ten years, and.where bonds are priced to produce lower returns."

History doesn't repeat itself, but the more truly diversified you are, the better off you'll be no matter what the market does. You'll really need to be patient, though. I'll get into that next week.

Howard R. Gold is executive editor of The opinions expressed here are his own.