NY Times Article on Savers and the Last Decade

The New York Times published an article today entitled: For Savers, It Was Hardly a Lost Decade. The article states that:

"If you invested $100,000 on Jan. 1, 2000, in the Vanguard index fund that tracks the Standard & Poor’s 500, you would have ended up with $89,072 by mid-December of 2009. Adjust that for inflation by putting it in January 2000 dollars and you’re left with $69,114.

But that is not how most real people invest. They don’t pour everything they have into just one type of asset and then add nothing to it for 10 years. Instead, they buy stocks of all sorts, and bonds and perhaps other things, too. And many millions of them dutifully add more money regularly, usually into a retirement account that they won’t touch for longer than a decade."

It's true that most people dollar cost average but I bet the average portfolio is not very well diversified. I had a portfolio with bond and equities and it took a major beating over the past year. In reality, it has not risen that much this decade, minus the cash I have contributed.

Dollar cost averaging works well for younger savers but not for those approaching or in retirement. The reality is that if you are approaching retirement and can't afford to lose a lot of money, the stock market is not for you. The Dow and the S&P are still significantly off their highs and may never come back. The Nasdaq isn't even close to its high of 5,000. Older investors don't have the luxury of dollar-cost-averaging.

Which means that older investors should have minor exposure to the stock market.