Steadfast FinancesS&P 500 Index Below 1000: Decade Low Index Funds

S&P 500 Index Below 1000: Index Funds Nearing Decade Lows Once Again

Filed in Auto Sales , Bargain Hunting , Energy crisis , Financial Crisis , Green Living , Index Funds , Retirement 1 comments

The S&P 500 is below 1000 and index funds are nearing decade lows.  Do you know where your investments are?

For edification purposes only, if you haven’t received your quarterly statements through the good ol’ fashioned snail mail just yet, take a quick peek into your online retirement account.

Feeling Hulk-ish yet?  Good!  Me too!

If you’re not into watching the financial news everyday (good for you if you don’t), were you shocked at the results?

What’s going on?

Well, as it turns out, the subprime mortgage crisis turned into a full blown financial crisis, which has now morphed into a full fledged panic attack.  The major players on Wall Street are not only selling stocks, but they’re literally too afraid to buy stocks because no one wants to be stuck holding worthless equities when Cash Is King!

Even Jim Cramer, the famous (or infamous depending on your views) host of CNBC’s Mad Money, came out earlier this week on the Today Show and said investors should sell their stocks if they plan on holding them less than 5 years.  That’s pretty normal advice to give on a business network like CNBC or Bloomberg because we’re accustomed to hearing such talk, but considering he said it to mainstream media, it probably made more than one investor rush to their online brokerage account and began liquidating stocks like mad.

What’s up with my Vanguard Index Funds?

The S&P 500 Index has literally been taken out behind the woodshed and beaten senseless.  Stocks all across the board, in every sector, have been hammered regardless of their fundamentals, their excellent growth prospects, or whether or not they created a goody-goody green energy plan to lower their carbon footprint.

Today, the S&P 500 Index closed below 1000 for the first time since 2003 (see chart), and seems to continually lose ground that was gained during the great bull run of the 1990s.

Which essentially means, had you been dollar cost averaging yourself into the Vanguard S&P 500 Index (VFINX), like I have over the last 10 years, you’ve essentially been treading water and sitting on zero gains, or worse, a negative return on your investments.

I’ve made no secrets about my views on index funds being bad investments (for the record, I do own index funds for diversification purposes), but if you’re an everyday investor with a long time horizon and don’t want to actively manage your investments, then index funds are among the best places for your money.

For those with stronger constitutions than most, I do feel like this market is on sale.  I’m not suggesting you run out and buy everything in site, but continue on with your dollar cost averaging plan or pick up a few stocks that you feel will rule the world after we have emerged from the current financial crisis.

What’s next?

Now that my rant is over, I’m curious how the rest of you are coping with your “statement shock“?

  • Planning on showing up at your financial planner’s workplace with an angry mob and a pitch fork?
  • Are you reducing or eliminating your 401k contributions?  FYI – bad idea!
  • Possibly boosting your contributions to buy when prices are lower just like Warren Buffett and the other bargain hunters of the world?

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Photo by arkworld

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Posted by CJ   @   7 October 2008 1 comments
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