Comments on: Investment Performance: It’s a Matter of Perspective

By: Samson Smith

Samson Smith — Fri, 25 Sep 2009 06:37:53 +0000

Great post, I totally agree that long term investment is very safe, people who are planning for investing will get good information from this post.

By: Tony @ This Young Economist

Tony @ This Young Economist — Fri, 11 Sep 2009 02:12:29 +0000

Nice graphs. I love how you can see the two big bubbles on the last chart.

Well, I don’t love that the bubbles happened, but it is a really interesting and informative set of graphs.

FYI: I accepted this article into the Carnival of Economic Fun #2. It will appear on Wednesday, September 16th. Thanks for submitting.

By: Cecil

Cecil — Sat, 15 Aug 2009 01:16:52 +0000

Great post, and it really serves to highlight the fact that when investing for the long term you don’t need to worry about short term (month-by-month, let alone day-by-day) fluctutations.

PS: Google finance actually has a setting change the charts from linear to semi-log!

By: Nickel

Nickel — Tue, 11 Aug 2009 16:05:45 +0000

Paul: I agree that a semi-log plot would be a great way to look at these data. Unfortunately, I didn’t have the time when writing this post, and the variability issue wasn’t actually the point. Nonetheless, I think it’s a great idea. If the engineer in you is looking to kill some time, be sure to send me a copy!

By: Paul

Paul — Tue, 11 Aug 2009 15:06:11 +0000

One thing the engineer in me recommends (that I’ve never seen done) is to plot the data on a semi-log graph. That is, plot time on the linear,horizontal axis the way you did, but plot the logarithm of the Dow Jones or S&P on the vertical axis. This would give a better picture of the percentage impact of gains and drops over the years.

By: RB @ RichBy30RetireBy40

RB @ RichBy30RetireBy40 — Tue, 11 Aug 2009 04:27:04 +0000

Great charts Nickel! I think the bottom line is that an 8% average return is overly optimistic. 5% is a more realistic return to calculate one’s pro-forma retirement plan. Perhaps even 4%.

I have sold 75% of all my equities over the past 2 weeks. I would suggest taking profits. Afraid of the September double dip!

Rgds, RB

By: Nickel

Nickel — Mon, 10 Aug 2009 19:23:57 +0000

Mike: I agree that we’d see a lot more volatility if we re-scaled the data. For example, Black Monday looks like a blip when it was actually a watershed even. That being said, I think you’re right that the ups and downs of the past 10-15 years have been atypical.

By: My Journey

My Journey — Mon, 10 Aug 2009 16:56:12 +0000

Its a little freaky when you play with the time on your investment accounts. Just to see how things were going I requested the YTD on my 401(k) – HELL YEAH UP 22%. Then I did the 1 year return – down 30% OUCH!

By: Mike Piper

Mike Piper — Mon, 10 Aug 2009 13:34:18 +0000

I think this post is a very neat idea. Great job visually illustrating the importance of holding period.

I would add one caveat: Admittedly, to my knowledge, the market has been particularly volatile over the last decade and a half. However, in the last chart, it’s visually exacerbated by the fact that the volatility in the earlier periods (though significant as a percentage) looks insignificant simply because all of the amounts are small.