Buy shares of an index fund and leave it alone, financial experts have advised for years. But if you did that at the beginning of the last decade, you lost money even after the stock market bounced back in 2009.
Now, some of those experts are calling the 2000s the "Lost Decade," according to USA Today. For the first time, the Standard & Poor's 500-stock index finished a calendar decade with a negative total return. One dollar invested at the outset of the decade was worth just 90 cents at the end, and that was even after the S&P rose 23.5% in 2009.
"I've lost a bet. I've lost my keys. But I've never lost a decade — until now," Sam Stovall, S&P's chief strategist, quipped in his "Lost Decades" report.
Meanwhile, a $1 investment in gold grew to nearly $4, and a buck invested in U.S. government bonds nearly doubled in value.
Now the question is whether the old maxim about sticking with the stock market has been debunked or if the "lost decade" just means the next one will bring a compensating boom.
In the past, stocks have fared well after 10-year periods in which they were beaten up, points out USA Today. The S&P 500 has never suffered back-to-back losses in calendar decades. An analysis of the 15 worst rolling 10-year periods for the S&P 500 by The Leuthold Group found that stocks posted positive returns in the next 10 years in all 15 cases. The average annual gain: 10.7%, topping the 10% long-term average.
"In general, after bad periods come good periods," says Bob Doll, global chief investment officer of equities at BlackRock.
One major reason is that the overreactions that typically cause a steep drop in stock prices bring value. Another is that the pessimism wrought by a down period instill discipline in investors to make more sound choices.
Still, some money watchers don't think the problems of the last decade were entirely precedented. Michael Panzner, who writes a blog, Financial Armageddon, and is the author of When Giants Fall: An Economic Roadmap for the End of the American Era.
"They fail to grasp that the crisis-led downturn was not a cyclical event, but the first stage of a secular recalibration," Panzer said.
Panzner believes the problems at the heart of the dismal decade — a busted housing bubble, an economy built on debt and an easy money policy from the nation's central bank — have yet to be resolved.