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IPFS News Link • Economy - Recession-Depression

Investors Have Already Forgotten The Most Important Financial Lessons Of The Past Decade

• Zero Hedge - Tyler Durden

With only a few trading sessions left in the decade, the Wall Street Journal's investing columnist Jason Zweig, the longtime author of paper's "Intelligent Investor" column, is looking back on some of the biggest blunders of the decade.

As it turns out, there were a lot: Remember, investors started the decade with US stocks near their post-crisis lows, with few anticipating the unbridled rebound that would come to pass during the ensuing months and years.

Even more surprising was the drop in interest rates: Negative interest rates were a defining feature of the decade. But few expected them to persist as long as they did, nor did they expect Treasury yields to remain mired in the 1- and 2-handle territory for as long as they have. Ten years ago, most investors expected yields and interest rates to climb back into a "normal" range north of 4% on the ten year.

Investors couldn't have been more wrong. But that's not all that surprising, as Zweig explained. History has shown again and again that investors tend to base their expectations on the recent past. And at the end of 2009, investors were looking back on a decade where stocks had gone nowhere, value shares had outperformed growth, small companies had outperformed large companies, international shares outperformed US shares and EM markets had outperformed developed markets.

One of the more successful trends to emerge over the past decade is worth a quick note. And that trend is: retail investors' shift from active to passive funds, and from mutual funds to ETFs. Over the past ten years, investors withdrew more than $160 billion from all active funds, while pouring more than $3.76 trillion into index funds, according to Morningstar. Few active managers managed to outperform their benchmarks, making the comparatively low-fee index-based ETFs


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