Thursday, October 30, 2008

The next not-so-random years

I just finished A Random Walk Down Wall Street by Burton Malkiel and there was one part that captured my attention:

First was a table that read:
Era III- January 1982 - March 2000: the age of exuberance
S&P 500= 18.3%
Bonds 13.5%
Inflation rate= 3.3%

Then this quote:
“During our third era, the age of exuberance, the boomers matured, peace
reigned, and a non-inflationary prosperity set in. It was a golden age for
stockholders and bondholders. Never before had they earned such generous
returns.”


I’ve always been optimistic that small investments over time will produce good results for my husband and me. However, seeing this information, am I just a product of my upbringing?

Literally all the formative years of my life, my first eighteen years, are encapsulated during this age of exuberance.

This age of exuberance was preceded by two other ages: the first was good and the second was bad. Adding the third phase into the mix and we are due to have another 10-20 years of bad times. In other words, the fourth age isn’t going to be pretty.

Given this information, how does the idealist adolescent in me reconcile poor returns that will dominate the young adult years of my life?

No comments: