Sunday, February 10, 2008

April 8, 1999

What's special about April 8, 1999? On that date, the S&P 500 index closed at 1343, or 12 points higher than last Friday's close of 1331. In nearly nine intervening years, long-term stock market investors were rewarded for their patience with .... a 1.7% average dividend yield.

This is another way of looking at why I think we will see more long-term investors give up on their mutual funds. It's one thing to ride through two bear markets in one decade, but it's another thing entirely to collect almost no dividends in the meantime. Even those who survived the great depression were rewarded with 10% dividend yields once that bear market ended in 1932. Today's investors, on the other hand, can't see any significant dividends on the horizon, and have to live with the fact that a 3% savings account in 1999 would have resulted in better returns and fewer headaches than their stock funds.

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