Yes, in scenario one you only had 1.74% growth, less than inflation. Inflation adjusted, you went from 100K to 92,988. As you said, drawback of concentrating in a single country.MoreDealsPlease wrote: ↑ That's a cool tool. Thanks for pointing out the effects of dividends and also that the couch potato portfolio would have outperformed S&P500 during those periods.
Here is the scenario I was describing: 2000 to 2013, 100K is only 124K at the end
Here is an even more pessimistic scenario: 2000 to 2009, 100K becomes 56K
Now, best case scenario if the person held on to cash for 2 more years and waited for the crash (2002 to 2013): 100K becomes 200K
The 9 year scenario is actually somewhat relevant to me because that's what I'm aiming at for reaching financial independence and we are at an all time high similar to those periods pre-crisis. 100K becoming 200K vs 124K is quite a difference.
In scenario two, <10 years is an inappropriate time frame for an 80/20 stock/bond portfolio. Investors who panicked or were forced to withdraw funds due to retirement had locked in losses. 5 years from retirement you build a bond tent/GIC ladder so you aren't blindsided by crashes.
A 60/40 diversified portfolio fares better, with a 0.15% growth rate, and an inflation-adjusted end value of 82,454.
A diversified conservative 40/60 portfolio basically was able to keep it's value, with a 2.21% growth rate, and an inflation-adjusted value of 98,074.
A diversified very conservative (read: income) portfolio gained value even through both downturns, at the cost of total growth. A 4.08% growth rate, and an inflation-adjusted end value of 114,160.
The chances of you having the best case scenario is very slim. You cannot predict a crash.
We could go on another bull run for years. Staying in a conservative portfolio because of the fear of a downturn causes you to miss out on growth.
I think it's an unrealistic goal to use the stock market to reach FI within 10 years using passive investing. Compounding takes time. Trying to time the market isn't just gambling with your money, its gambling with your time as well.