But don't forget stocks. Even if market averages don't show big gains, it's still possible to make money. "Life was not boring in the '70s," says Wanger. "There was a lot to do." Like research. Without the overall market doing much, you'll have to scrape out gains by picking good individual stocks or funds, as there will be no rising tide to lift all boats. Investors might want to keep an eye on smaller stocks. Not only do they generally trade at lower multiples than big stocks but they tend to post double the return of large-cap stocks when the big boys gain less than 10 percent in a year. Among Wanger's top picks are slot machine maker International Game Technology, auto lender AmeriCredit, and bike maker Harley-Davidson. The key is to be a bottoms-up stock picker and not a "theme" investor. Volatile markets typically have sectors that fall in and out of favor as investors quickly shift from one hot group to the next. The S&P Web site (www.spglobal.com) is a good place to check sector performance. So far, the sectors doing best as the economy recovers are auto parts, appliances, and restaurants. Semiconductor equipment has been the lone bright spot for techs of late.
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If you are more of an index fund lover than a stock picker (Page 42), you might want to add a fund that tracks a small-stock index like the Russell 2000, such as those from Vanguard. Granted, all of this is a bit of a downer after the groovy ride of the past 20 years. But if a period of sluggish returns is followed by another two decades of big gains, most long-term investors will conclude that this long, strange investing trip of the new millennium may have been well worth the ride.
1970s
High inflation, high oil prices, high interest rates, and high crimes (remember Watergate?) all freaked out stock investors. It was a malaise market for a malaise decade. The S&P hit a record high in 1972, then was mauled by a brutal two-year bear. Meanwhile, does anyone still have a "Whip Inflation Now" button?
S&P 500 5.86 pct.
Small stocks 11.49 pct.
30-year bonds 5.52 pct.
Inflation 7.37 pct.
1980s
Business Week prophesied the decade would see "The Death of Equities," but investors took little heed. Galvanized by tax cuts and the supply-side economics of the Reagan administration, the market went on a decade-long climb interrupted only by a quick, but nasty, correction in October 1987.
S&P 500 17.55 pct.
Small stocks 15.83 pct.
30-year bonds 12.62 pct.
Inflation 5.09 pct.
1990s
If greed was good in the '80s, it became even better in the '90s as investors greeted the Internet era and bid stocks sky high. Individual investors came to believe in their own divine stock picking, and CNBC became the sitcom of choice. The party seemed never-ending--which held true, at least until 2000.
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