Saturday, January 2, 2010

The Mean Decade: 2008 - When the financial world crumbled

Sun Media reporter Thane Burnett has written a series on the past decade in which he found very little good to report. When it came to 2008, the article carried the headline, "The Mean Decade: 2008 - When the financial world crumbled."

Many of us, who have been saving for retirement and rode out the truly frightening 2008 correction of historic proportions, are kicking up our heels with glee. In the end, it was a good decade.

2008 was bad when you think about investments, but it was not anywhere near as bad as the media would have one believe. Everyone did not buy at the peak and dump their stock when all bottomed out. The story is far more complicated than that. Let  me give you an example.

If you had put $10,000 in a simple fund, say the TD Monthly Income on Jan. 1, 2000, you would have had $18,024.49 at the end of 2008. When growth like that is being achieved, saying the financial world crumbled as Burnett claimed, is the all-too-common shallow media response to a complex story.

If you had left the money in the TD MIF until the decade ended, you would have had $23,552.99 for an increase of 135.5% during the "mean decade." The financial story is not over but as the decade ended, the story was hitting some very positive notes.

I, by the way, owned a lot of TD MIF until early this year when I dumped about 75 percent of my holdings for CIBC Monthly Income. The CIBC offering has not performed as well as the TD one but it did not drag my portfolio down either, just put a gentle brake on its growth. A little less volatility offered the benefit of a better night's sleep. I'm not upset about my decision.

Like many investors, I found 2009 an amazing year, giving portfolio growth in the 30 percent range. If the 2008 crash chopped  a fast 20% to 25% off your balanced, diversified portfolio, 2009 may not have pulled you free of the financial hole dug a year earlier, but you are sitting in a very comfortable position.

A $100 thousand dollar RRSP portfolio could easily have been cut to a $75 thousand dollar portfolio in 2008. But that $75 thousand could easily have regain most of its losses in 2009. (100 X .75 X 1.3 = 97.5)

If you had had the nerve to buy into the market in the spring, there are lots of ETFs and inexpensive mutual funds that would have paid handsomely.

It is a rich, complex world. If someone tries lumping ten years together, a whole decade, one has to ask a few questions. The first question is, "Why is the Sun Media reporter not asking more questions?"

And they (Sun Media and other media folk) wonder why newspaper sales are slumping.
I also looked at this silliness on my other blog, Rockin' On: Money.

1 comment:

  1. Good use of "they" (last graf), Kenny. Keep up the good work. (However, a little instruction in comma use would be beneficial. Perhaps an appointment could be made with my secretary.)