It Wasn't a Lost Decade for Everyone
And by broadening your holdings to the entire US stock market—including small- and mid-cap stocks—and investing it all at once at the dawn of the "lost decade," you would have cut your losses by half again.
Adding only a small dollop of international exposure ($10,000 out of the $60,000) on January 1, 1999 would have pushed this 100%-equity portfolio close to break even, leaving you with nearly $59,000.
See my point? Even a diversified equity-only portfolio cut losses dramatically.
But when you add bonds to the mix, it gets really interesting.
Obviously bonds were the place to be over the past decade, although not too many gurus pounded the table for them ten years ago. Economist Gary Shilling, a bond bull since 1981, has noted that bonds are the most unloved assets by the people who hold them. When I recommended buying bonds at a conference in Boston in 1999, an attendee complained they were "boring."
Well, how boring is this? If you stuck $60,000 in a broad bond index fund on January 1, 1999, you would have had over $100,000 by the end of last year, an annual return of over 5%. Cash, an even more tedious instrument, would have yielded 3.48% a year, risk-free.
But here's the beauty part: A simple 50/50 split between stocks and bonds would have returned almost as much as our most diversified portfolio of the broad US stock market, developed and emerging market international stocks, bonds, REITs, and cash—over $78,000, or 2.66% annually.
And you didn't need a broker, financial planner, newsletter writer, or financial journalist to put you into it.