Hi Sy,

As you know, I have no love for "Wall Street" (and own no stocks) but I think the claim is a little exaggerated on two grounds:

1) It doesn't appear to include dividends, which can definitely add up.

2) Applying the "rule of 72" to the CPI, I think you'd need an average 9% inflation rate over the last 8 years to get the total inflation rate for the period up to 100% . . .

All best,

Pete

Especially to those who are still working, I'd remind you that you're not putting "$10,000 in the market at the peak", you're buying each pay period while the market is down. And for those with an itchy trigger finger, you might be interested in this T.Rowe Price Quarterly "TRP Report" magazine (Summer 2006 - page 6 of the [Link .PDF file].)  (Note: I'm not 100% sure you can post links directly into the T.Rowe Price site. You can't do that too well on Vanguard, for example.)  Here are the two key paragraphs:

Bailing Out of Market Declines Can Hurt Long-Term Returns

The firm compared the results for two hypothetical investors. One maintains a diversifi ed equity portfolio comprising 60% large-cap stocks, 20% small-cap stocks, 15% developed international markets, and 5% invested in emerging markets (as represented by various indexes). The other investor, who has a tendency to overreact to sharp market setbacks, sells any of these asset classes after a 10% monthly decline and invests that money in cash. He does not reinvest in that asset  class until it gains 10% in a month.

...while the “in-and-out” investor did considerably worse, earning an 8.0% annualized
return, even though he had no exposure to large-cap stocks during the severe 2000-2002 bear market. In other words, a $100,000 portfolio at the start of the period would have grown to $517,499 for the steady investor, or 43% more than the $360,659 for the in-and-out investor. Of course, past performance cannot guarantee future results.

As Bob asked (in the REA context) recently, "Are you in it for the long-term or the short-term?"

Tim 

Paul Farrell is not my guru, to be sure. In fact, he seems a bit hysterical and driven to make fantastic claims. He also refers too often for comfort to "12 steps" (which suggests to me a recovering alcoholic). But he does hold an important editorial position at Money Magazine, I believe. And he advocates the basic "do-nothing to disturb" asset allocation portfolio. I have his book which leaves you with possibly too many "good choices".

As to Bob's question: I'm in it for both the short-term and the long-term. That's why I have a headache.

As for Ray's comments: He's an intelligent timer, plus a long term investor, and I'd follow his lead.

T Rowe Price's example seems self-serving. Most people that are fearful of market declines don't just let money sit in Money Market for long periods. Particularly if they have access to TIAA Traditional and TIAA Real Estate (which is in the hospital and hopefully will recover).

Sy  

Thank you.

Makes sense for equities, but not necessarily for TREA, which changes at a snail's pace -- soooo flat right now, down again today, and with the outlook being what it is...  getting 5.25% in Traditional as an option for a year does not seem very risky in terms of foregone return. 

Not sure that comparing TREA to equities is useful.  I also don't think comparing TIPS (ILB) to equities or even "real" inflation is useful for most investors.  Both might be better compared to Traditional or possibly bonds (not into except munis) in terms of incremental risk and return, and their role in filling the nonequity part of the porfolio. 

 jan