Dave  Moenning

It is probably a safe assumption that most people invest in the stock market with a goal of creating wealth (i.e. "getting rich") over time. And I'm guessing that a fair number of people - especially those seeking investment guidance on the internet - would prefer to "get rich" sooner rather than later. Please note that this is not meant in a derogatory manner. No, I'm simply suggesting that most investors likely have an investment time frame of 10 to 15 years as opposed to 40 or 50 years. As such, those looking for their portfolios to work for them within a 10-15 year time horizon don't necessarily have time on their side.

This is not to say that investors can't "get rich quick" these days. Despite the relatively crummy performance of the stock market (SPY, DIA, QQQ, MDY, IWM) over the last 12 years, there have been opportunities for profit and ways to "get rich." The question though is if the average investor is up for the task.

For example, up until just recently, the investing public had been schooled by the mutual fund industry to invest for the long term. The simple pitch to investors was to put your money in a good fund such as Fidelity Contrafund (FCNTX) or American Funds Growth Fund of America (AGTHX) and leave it there. Those selling you such an approach had history on their side as they could say with certainty that the stock market had only experienced only 2 negative 10-year periods in the last century. In addition, if investors would just have some patience, they would be rewarded in the long run as the stock market had NEVER been a loser over a rolling 20-year period.

Then the calendar changed. To the surprise of many, the computers didn't crash on 1-1-00 as the new century was ushered in. But since the beginning of 2000, things have not been so pleasant for stock market investors. During the first 10 years of the new century, the S&P 500 saw double digit declines four times (-10.14% in 2000, -13.04% in 2001, -23.37% in 2002, and -38.49% in 2008). As a result, the rolling 10-year period that began in 2000 saw a net decline of -24.12%. And as of 9/30/2012, the S&P 500 cash index still sports a cumulative loss for the new century.

Those growth funds that were all the rage in the 1990's have actually fared worse. According to the Lipper, their Large-Cap Growth Fund Index has produced a cumulative return of -17.38% since 1/1/2000. Thus, after 12.75 years, investors in the growth fund index will need a gain of 21.03% from here in order to get back to breakeven. Ouch.


Dave Moenning

David Moenning is the President and Chief Investment Strategist for Heritage Capital Management, a Chicago based SEC Registered Investment Advisory firm which he founded in 1989. You can follow Dave at .