I’ve posted Entry #84 to my weekly Beyond Buy-and-Hold column at the Out of Your Rut site. It’s called Ten Years of Losses Will Leave You With A Bigger Portfolio Than Ten Years of Gains.
Juicy Excerpt: The assumptions that I entered are that you start with a portfolio of $10,000 and then add $10,000 each year. See a return of 5 percent for each of the first 10 years and you will at the end of 30 years have a portfolio value of $998,579. See a return of a negative 5 percent for each of the first 10 years and at the end of 30 years you will have a portfolio value of $1,739, 987.
That’s a difference of over $700,000. The second portfolio is not quite twice as large as the first portfolio, but it comes not too terribly far short of hitting that mark. Please understand that both scenarios assume the same level of economic growth. In both cases, the annualized annual return is 6.5 percent. The returns are not really better in an overall sense in the second case. They are just a whole big bunch better for you, the investor.