Under the mattress money outperforms equity

This year has been a disaster for investors as their stock portfolios dive to unimaginable level. Frustrated investors may be discouraged from buying stocks for their retirement. The daunting truth is that they would be better off putting their money under the mattress than saving in equity funds or balance funds in the past ten years. The following excerpt and chart from The Economist tells a little of the facts

… The stockmarket’s decline this year has been so steep that it has erased all the gains made in the rally from 2003 to 2007. In late November, the S&P 500 index dipped to its lowest level in 11 years. The extravagant claims made for equities in the late 1990s, when there was talk of the Dow Jones Industrial Average hitting 36,000 (or even 100,000) have proven to be hollow. Lately the Dow, which was at about 13,000 at the end of last year, has been trading between 8,000 and 9,000.

… Those who have been methodically putting money into pension plans (often known in America as 401(k) schemes) must be wondering why they bothered.

Figures from Morningstar, an investment-research firm, show that an American who put $100 a month for the past ten years into the average equity fund would have accumulated just $10,932—$1,068 less than he invested. Even a balanced fund (one that mixes government bonds and equities) would have lost money.

… The value of stockmarkets around the world has fallen by almost half and is now about $30 trillion below its peak.