Recently, the hotties* over at Vanguard said that they think that the stock market is probably going to suck some donkey dick in the next decade. (My words, not theirs.) And I tend to agree with them.

*Us finance dweebs love Vanguard; they were one of the first to offer low-cost, index (non-managed) funds because the founder, John Bogle, realized pretty early on that managed mutual funds are a huge scam.

But here I am, in this unique position where I help people understand how to invest in the stock market. I am teaching people how to do this thing, while fully realizing that we are staring down the barrel of what might be a real bummer few years.

So, I wanted to provide some clarity on Vanguard’s statement, and more importantly, how you should deal with it. If you have any skin in the game, read on. Understanding why the stock market sucks sometimes and how you should deal with it are paramount to your success at not fucking it up. Basically, here’s how to be a rational adult about it (which you are!!).

First, what did Vanguard say?

Vanguard predicts that the U.S. stock market as measured by the S&P 500 (the 500 “leading” companies in the United States) will return between 3% and 5%, annually, over the next ten years. Considering inflation will probably be around 2%, this doesn’t leave much to be enjoyed in terms of real wealth growth. For reference, the historical average for the S&P 500 has been about 10%. (Many experts think that in the future, we should probably downgrade our expectations to between 6% and 8% returns.)

Translation:

If the last decade was a booty-shaking barn-burner complete with dancers in cages and monkeys on stilts handing out flaming cocktails at a Jamaican dancehall until the sun rises, the next decade is going to be a bridal shower at some distant aunt’s house. Like, there will be some bubbly and delish snacks but also moments that make you want to stab needles in your own eyeballs. Think: conversations with boring old ladies, watching the bride unwrap Crate and Barrel stemware for two hours.


During the last decade, which has been a “bull”—or good—market cycle, U.S. stocks have seen a total return of more than 200% (measured from the “bottom” on March 9th, 2009, to where we are now). The average for the yearly returns for each of the last nine years has been over 15%. (Ranging from a weeny 1.38% in 2015 to a fuckin’ metal 32.39%, in 2013.)

Vanguard’s study goes on to discuss specific reasons why they believe that the next decade won’t be another champagne-poppin’ yacht ride on the Mediterranean, but I wouldn’t worry too much about that. Here’s what I want you to understand:

What doth the Dumpster Doggy say?

1. Shit’s gotta level out at some point.

We call this the “reversion to the mean.” If we think that the average over the very long-term (30+ years) is going to be between 6% and 10%, and it’s been at 15% for the last ten years, we can probably expect the next ten to be far below that average.

Think of it like partying: Let’s say you go out for three nights in a row. You smash well tequila, make-out with a few dum-dums, and spend money like you’re Paris Hilton on Ritalin. You’re at a 10+. Then, you wake up on Sunday with a hangover so vicious it feels like your guts are rotting out in real-time. What will you want to do for the next five days? Probably take it easy, right? You’ll spend a few days at a 2, then maybe a few at a 4. Over time, you average a 7. The point is, sometimes you’re high on ecstasy and sometimes you’re eating pad thai beneath the covers for four days straight. Same with the stock market!

2. After periods of great bounty, it’s normal to expect that you’d see periods of tepidity. The stock market, just like the economy (and life) moves in cycles. It does not mean that the stock market is broken.

What does this mean for investors?

This article on CNBC does a good job explaining what we can do about it moving forward. I’m not going to re-hash what they’ve already said, but want to expand upon it. It leaves out some very important details.

Their suggestions:

1. Keep saving (for retirement and other goals. Also, do you have an Emergency Fund yet? If we are approaching tumultuous economic times, you need to be prepared!)

2. Make the most of your cash by using a high-interest savings account (yup)

3. Pay down debt (yup, great time to go HAM on the debt that makes you cranky. Even if we get boring returns over the next decade, think of how fabulous it would be to eliminate some debt: Get rid of credit cards! Pay extra on your mortgage!)

4. Don’t panic, time is on your side (stay calm!!)

My suggestion:

5. Keep investing.** As always, you should automate your investments (both the contribution of cash and the continual reinvestment of that cash) and don’t stop because of market predictions. Not from Vanguard, not from me, not from anybody.

**Only if you believe that stocks make sense for your long-term goals and you can mentally and spiritually handle the inevitable crash. Crashes will happen, don’t be an asshole and sell out when the shit hits the fan.

Winning at the stock market means being invested for as much time as possible. That’s why automatic investing works so well; ya just need to get in there. You never know when there will be a huge “up” day, week, month, or year. And if you miss the best days and months in the market? Your returns will be even shittier than the shitty returns that we’re already predicting.

Another reason you should keep investing? No one knows whether this will actually happen. It’s all speculation. We’re talking as if you’re guaranteed ten “meh” years after ten great years. Hard nope. The stock market is just not that predictable. The researchers at Vanguard are simply looking at what’s happened in the past and extrapolating those trends into the future. History is a super helpful guide, sure, but it does not provide us with “clean” predictions (ten years on, ten years off).

For example, what if you decided not to invest for the next decade, and one of these scenarios happened:

  1. The stock market does really well for another ten years, and then is flat for the next twenty
  2. The stock market does really well for another three years and then flat the next decade
  3. The stock market is only flat or down for the next five years and then does really well for the following five

Point is, we just don’t know. And since we can’t predict when “things are good” and when “things are bad,” you have to commit to riding through all of it. There is literally no chance that you would be able to perfectly “time” the ups and downs.

And even if returns are paltry during the next decade, at least they’re still compounding!! (Don’t understand compound returns? Read this.)

How this will feel:

While researchers are predicting a “flat” or lackluster decade of returns, please know that this DOES NOT MEAN that each and every year will be +2%. It is much more likely that we’ll have a couple of nasty years, like in 2007 and 2008. There will also be positive years, and then, the overall average will be low. Or, MAYBE we WILL have ten +2% years in a row, hell, no one knows! And what I need you to understand that both scenarios would be fine. Any scenario in the stock market is possible, and it’s all normal. If the stock market is down 30% next year, that would be normal. If it’s +2% next year, normal. It’s all normal.

(If you haven’t yet, read The Stock Market is Going to Crash. Are You Ready?)

Real talk: If you’re hanging your hat on the next ten years, stock market investing ain’t for you. To succeed, you’ll have to accept a much longer timeframe. Think like: thirty or forty years. Which is hard!! Waiting thirty years for gratification just doesn’t compute in our cave-lady brains that were hardwired to make it through each day, hunting for food and roundhouse-kicking a sabertooth tiger that comes near our cave-babies. It takes practice and a commitment to decades of participation.

The next decade could feel like treading water, which is hard and very low on the list of activities I like. Mentally prep for this.

Also, consider foreign stocks:

The precipitous climb by stocks over the last decade has largely been by U.S. stocks. By comparison, foreign (non-U.S.) stocks have performed terribly. There are a lot of folks who go diehard for U.S. stocks, but I prefer a more balanced approach. I’m much more inclined to believe that foreign stocks will take the lead in the coming decades, given their relative underperformance in the last decade. It may not happen, but right now foreign stocks appear to have more room to move. Don’t change your entire strategy on my prediction ’cause I ain’t no soothsayer, but history tells us that the U.S. stocks won’t always be best.

Purple: U.S. stocks (S&P 500)

Blue: Foreign stocks (MSCI World ex-US)

Want to learn EVEN MORE about investing? Sick of trying to cobble together a complete education using blog posts and online resources? Take my live, online, four-part Invested Development course. It’s Investing 101, but fun and actionable, and geared towards young women. Read more about it here

5 thoughts on “What to Do If the Next Decade in the Stock Market Totally Blows”

  1. Set and forget continues to be my goal. But I also appreciate that not ALL of my investments are in the stock market, so I’ve a little more leeway depending on how the real estate market does as well. And really, no plans (or interest) in full retirement for more than 10 years, so I’m just here for the ride.

  2. Kristin Kofmehl

    As always your sage advice is helpful and literally made me LOL. Stay calm and invest on!

  3. I plan to keep the auto investing up no matter what!

    I also think getting a little more diversified into real estate could be a worthy endeavor in order to not have all my eggs in one basket if the stock market does actually perform terribly.

  4. You are simply the best. Set it and forget it all the way. If I don’t automate the hell out of my life nothing ever will get done. There were studies showing the people whose investment accounts did the absolute best were those who forget they have one… beaten out only by those who died. So… I’ll check back in on my balance in a decade. 😀

  5. We’re automatically investing in the market for as long as we get paychecks. I’ll admit to having a stomach clench when I read their predictions because ideally I’d like to retire in ten years but honestly that wasn’t set in stone and wholly dependent on the stock market anyway. And as you said: who knows what’s going to happen? Sure as shooting, in 2008, no one that I read ever predicted we’d see these kinds of gains by 2018.

    So I’m staying in and adding some bonds because our portfolio ratio has gone to 99% stocks over the last ten years and a little balance never hurt anyone. I’m aiming for 75/25 domestic and international stocks right now. I probably won’t play with that too much.

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