Japanese man in his 70s: "Yippee Yay! It only took 34 years to get back what I invested in the index, because indexes always go up. And now everything costs double".
Looks like the Nikkei 225 average dividend yield is around 1.4%. If you bought in 1989 and reinvested dividends it looks like you would have briefly broken even in 2015 (ignoring inflation), then hit solid black sometime in 2017. This is completely absurd and shows how huge of a factor timing is in market investments.
Remember, kids, dollar cost averaging is usually the way to go.
Yeah but it's also an absurdly rare occurrence that someone would put 100% of their wealth I to the stock market RIGHT before the crash and then never invests again (more than the dividends). These headlines are fun and all but not very relevant for most people
While academically you are correct, I am not sure I would say it has never been a good idea. I have a US bias but most portfolios in the US have a significant if not total weighting on domestic markets. Even in my memory of the last 10 years there have been continuous questions on how much international exposure one should have. Most of the time you see something like a 5-10% exposure in international markets which in theory gives you the "best risk adjusted returns" but in reality since the US has been a continuous powerhouse, gives you a lower overall return.
Many people, especially in Japan don't realize not investing and simply saving means they're actually investing in their own country long term, which for Japan, doesn't look like a smart strategy at this point.
The boglehead philosophy involves slow accumulation of an index portfolio over time. Not many people had a huge windfall in 1989 and put it all in the Nikkei at once. The money you invested in 1980 is up 500% before dividends.
You are not entirely wrong. The thing is though, the US has been an economic powerhouse on the global stage for decades. The US health impacts much of the rest of the world's markets.
While that is true, there's also no guarantee that we do not see a stagnation of the world stock markets for decades. World indices are also highly concentrated to a few countries, e.g. US is more than 60%.
Yes, if you invested all of your wealth in the index right before the crash then you were in very bad shape. But this isn't how most investment works. You buy in as you accumulate more savings. Most investors also got to experience and benefit from the extreme runup.
Hopefully they didn't sit around without investing for 34 years.The evolution of what they invest 34 years ago (at the peak) is only one part of the equation. There is also what was invest a while before that. And when was earned and invested each year since. No matter which country, you don't want to find yourself investing only at the peak and nothing before or after.
If you look at the actual returns they recovered years ago (tho not so long).