Reply to Too risky to put extra funds in the market?

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[quote=Anonymous]Because of recency bias, everyone will tell you that you have to plow it into the market “as long as you’re in it for the long-term.”

They apparently don’t know that for approximately 45 of the last 100 years, T-bills actually outperformed the S&P 500 (not in 45 individual years, but over several multi-year periods whose duration totals 45 years).  In other words, at any given time, it is essentially a coin toss as to whether one is better off putting one’s money in stocks or T-bills.

Here is an example of one such period.  In 1966, the Dow first touched 1,000.  Stocks then basically went nowhere for 16 years, with some massive crashes along the way — Buffett said the 1973-1974 recession had the best deals he ever saw in his life — and the Dow touched 1,000 again for the last time in 1982.  Moreover, that of course was after the massive inflation of the 1970s, meaning that the shares of the Dow at 1,000 bought much less in 1982 than they did in 1966.  Sixteen years seems pretty “long-term” to me and a long wait just to finally have the chance to outperform the guy who just kept his money in the bank.

Given that it’s basically a coin toss at any given time whether one should buy stocks or remain in cash, I don’t see how anyone can look at the craziness going on in the stock market and decide they want to participate.[/quote]

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