r/stocks
What $10k invested in 8 major indices would be worth today *PART 2*
The author compares historical returns of 8 major indices from three starting dates, concluding mid-cap stocks performed best on average.
- Long-term index investing has generated substantial wealth over the past two decades.
- Mid-cap companies have historically outperformed both large-cap and small-cap indices on average.
- Investing at the peak of the dot-com bubble significantly reduced long-term returns for tech-heavy indices.
Yesterday, I made this post: https://www.reddit.com/r/stocks/s/9mXDBM4ZyA
A few comments started that it was a poor representation of index performance because I tracked the data from the opening of VXUS in 2011 rather than, say, the opening of QQQ in the thick of the dot com era.
So, here are three different starting dates with the same set of indexes (or their proxies if the modern day index wasn’t yet created):
1. What $10k would be worth today if you invested it the day QQQ opened (March 10, 1999):
• NASDAQ 100 (QQQ): \~$149k (10.6%/yr)
• S&P MidCap 400: \~$119k (9.6%/yr)
• VTI (pre-2001 proxy): \~$89k (8.5%/yr)
• DJIA: \~$88k (8.5%/yr)
• S&P 500: \~$85k (8.3%/yr)
• Russell 2000: \~$78k (8.0%/yr)
• VXUS (pre-2011 proxy): \~$43k (5.6%/yr)
• US Agg Bonds: \~$28k (3.9%/yr)
2. What $10k would be worth today if you invested it the day the dot com bubble peaked (March 10, 2000):
• S&P MidCap 400 → \\\~$104k (9.5%/yr)
• DJIA → \\\~$87k (8.7%/yr)
• S&P 500 → \\\~$79k (8.3%/yr)
• VTI (pre-2001 proxy) → \\\~$78k (8.3%/yr)
• NASDAQ 100 (QQQ) → \\\~$67k (7.6%/yr)
• Russell 2000 → \\\~$57k (7.0%/yr)
• VXUS (pre-2011 proxy) → \\\~$34k (4.9%/yr)
• US Agg Bonds → \\\~$27k (4.0%/yr)
3. What $10k would be worth today if you invested it the day the dot com bubble bottomed out (March 10, 2000):
• NASDAQ 100 (QQQ): \~$356k (16.6%/yr)
• VTI (pre-2001 proxy): \~$140k (12.0%/yr)
• S&P 500: \~$138k (11.9%/yr)
• S&P MidCap 400: \~$123k (11.4%/yr)
• DJIA: \~114k (11.1%/yr)
• Russell 2000: \~$102k (10.5%/yr)
• VXUS (pre-2011 proxy): \~$70k (8.7%/yr)
• US Agg Bonds: \~$21k (3.3%/yr)
What this data shows is that it’s actually mid-cap companies that performed the best on average in these scenarios. It’s also interesting that even if you invested the $10k in QQQ at the very peak of the dot com bubble, it still finished fifth in total returns, only 1.1% behind the DJIA and .7% behind the S&P 500.
The reality, though, is that most investors wouldn’t have been able to stomach holding onto a $10k investment in QQQ made at the bubble’s peak because of the underwater stretches that followed. For example, if you bought QQQ at the peak then you were below your starting money until around 2014. That’s fourteen years in the red. Even if you bought it at its 1999 debut (which eventually yielded the most returns out of all the indices) you were left underwater for about twelve years.
Bonds were last every time, but they were also the only thing that made the bad-timing decade survivable. If you bought at the 2000 peak, boring aggregate bonds beat every US stock index for the entire 2000s. In other words, they worked as the hedge they’re intended to be.
The first version of this post where the timetable starts around 2011 is real, but it’s the good-entry version. Slide the start date back to a bad moment and QQQ still wins in 2/3 scenarios, but with extremely long stretches of losses before eventually emerging on top. At the end of the day, if you have a long term investment horizon, the best strategy for major indexes like these is almost always hold. Otherwise you may get caught with your pants down and sell low and buy high.
**\\\Obvious caveat to all of this\\\:** Someone would have to be extremely unlucky to invest the $10k at the very top of the bubble, and extremely lucky to invest it at the very bottom. Most hypothetical investors would have dropped the $10k in somewhere between these two points, with a higher volume likely coming around the peak due to bull market euphoria.
Same!
If I recall correctly during dot com even SPY500 tanked -50% over 2 year period. More on QQQ for 3 years. Anyone who had any common sense wanted to get out of stocks especially those tech stocks. MSFT stayed underwater for 16 years not a few years. The Intel inside story was there always had more processors than they knew what to do. It was not until last year resurgence fueled by the govt and private sector. I had my own indices so losses were not as significant may be -37%. But I quickly cashed out much of the equity market went into saving bond and non-qualified annuity. Objective was cash preservation not wanting to expose risk more. That was achieved with 5-6% state income tax free and inflation adj(+55% from 2000-2025 era). My annuity one pays 3.5% from one tax free and another in equity. The first one depleted while equity is w/d monthly and I have more left than initially deposited.
After reading two commentaries below I still think I did the proper thing stayed partially out of the stock market and put in very safe almost tax free products. Today the annuity may not look that attractive so is inflation adj saving bonds. To prove that point I bought SPY, DIA, Equal weight SPY, Brk\_B for comparison for almost 10 years. Any crazy all red day, I notice Brk\_B often was the lone green fund while DIA is well diversified enough. Long term investment is best optimized having several indices moving funds from one to others.
What this shows me is timing is important
I’d argue it shows time in the market is more important than anything. Cuz if you invested that $10k as $1000k per year you would’ve made out better than any of these scenarios. Imagine you drop $1k near the top and near the bottom of the dot com bubble, then again for the 08 crash. You would’ve made out very well.
yeah because that's what most financial advisers and the best investors recommend "timing the market". /s
Reddit will never learn
You're referencing geriatric traders who established the bulk of their positions back when valuations were fairer, brokers were fewer, and liquidity, as well as global participation, wasn't what it is today.
and OP even told us when to do it! when the market is at the bottom!
the honest takeaway buried in the comments is behavioural, not mathematical. the returns look great on a chart but almost nobody actually sits through a decade underwater without capitulating, which is why the average investor return lags the fund return so badly. dollar cost averaging helps because it never asks you to hold a single lump through the worst of it. the index doesnt fail people, the holding period does.
The biggest takeaway for me isn’t that QQQ still did well. It’s that almost nobody would feel smart holding something that stayed underwater for 12–14 years. Long-term investing sounds easy until the “long term” starts with a lost decade.
Lost decade would only effect funds that were invested at the height.
Most people DCA monthly with money from each paychecks.
If you stuck $100 per month during that same period, you would still get around 9% average annual return.
100%.
At the risk of sounding self promoting, I have spent the last few months creating a stock picking recommendation engine with the goal of significantly beating the S&P etc. over a modeled 10 year period. The main driver/pain point seems to be that most normal folks don’t have enough capital or time at this point for standard market participation to move the needle for retirement, especially the way inflation and wages are going.
It only uses that very best fundamental companies out of a pool of high quality index funds, and only when those companies are near panic selling prices. Median outcome over 50 uniques 10 year periods (50 start dates between 2008-2016) is about 3x the median SPY return.
If anyone is interested feel free to DM, it is free
I was thinking of making one myself but I decided to make a perpetual motion machine in my garage instead. I'm probably gonna throw it away, PM me if you want it (just pay shipping and handling)
Jesus Christ
Not only did QQQ need 12-14 years to "go back to $0" gains... Inflation exists. If you even wanted to keep up w/ a 3% bond market rate or the like, it'd take even longer to "break even".
Also, the AI boom/bubble really hard-carried QQQ at the finish line here, didn't it? There's no guarantee that over the next 25 year time period there will be a similar boom for it.
I'm curious how a QQQ forever holder compares w/ someone who dropped it when the dot com bubble dropped say... 20% from peak, invested in the other various funds the same day, then say around when NVIDIA became the largest company in the market (ie, well past when the AI rally began, again... no incredible timing here) switched it all back over to QQQ.
How would those scenarios compare to the guy who never sold?
Maybe also would be interesting to measure till the end of 2019 for each, since that's before the 2020 craziness and AI becoming a big thing, to see how QQQ had done against the others by that point.