The dot-com crash and the lost decade
QQQ vs SPY, 2000 to 2010
Ten years that opened with the dot-com crash and closed with the financial crisis. The result is genuinely counterintuitive: the fund that fell 83 percent finished ahead of the one that fell 55 percent, and the reason says more about how contributions work than about either index.
#What this plan actually returned
These are real results, not estimates. We ran $10,000 up front plus $500 a month from January 1, 2000 to January 1, 2010 (10.0 years), with dividends reinvested, against actual daily closing prices for each fund.
| Ticker | Invested | Final value | Total return | Ann. return | Worst drop |
|---|---|---|---|---|---|
| QQQ | $70,000 | $77,029 | +10.04% | +1.67% | -82.96% |
| SPY | $70,000 | $73,048 | +4.35% | +0.75% | -55.19% |
Ann. return is the internal rate of return (IRR), which accounts for how long each individual contribution was invested, so it is lower than the headline total return on a plan that kept adding money. Worst drop is the deepest peak-to-trough decline in the fund itself during this window, measured on daily closes.
Pre-tax and excluding brokerage commissions. See How It Works for the full methodology, or re-run this exact comparison with your own numbers.
#The result most people do not expect
Both plans contributed the same $70,000 across the decade. QQQ finished at roughly $77,000 against SPY’s $73,000, an annualized return of about 1.7 percent versus 0.8 percent. QQQ won.
That sits badly next to the drawdown column, where QQQ fell 83 percentfrom March 27, 2000 to October 9, 2002, one of the most severe declines in the history of a major US index, while SPY’s worst was about 55 percent during the 2008 crisis. The fund that suffered far more ended up slightly ahead.
#Why the deeper crash produced the better outcome
A lump sum invested in QQQ in January 2000 would have been devastated, and it would still have been deeply underwater a decade later. That is the version of this period everyone knows, and for a lump sum it is correct.
A contribution plan experienced something entirely different. It started with $10,000 near the peak, which was destroyed. But it then kept buying every month, all the way down through 2000, 2001, and 2002. By October 2002, each $500 contribution was purchasing more than five times the shares it bought at the peak. The plan accumulated its largest share counts at the lowest prices of the decade.
When the Nasdaq recovered strongly from 2003 through 2007, those cheaply acquired shares carried the result. SPY fell less, so its contributions bought comparatively fewer extra shares at the bottom, and it also took the full brunt of 2008 with a larger accumulated balance.
The mechanism is worth stating plainly: volatility helps a contribution plan and hurts a lump sum, provided the asset eventually recovers. That last clause is carrying real weight, and it is why this page is not an argument for buying whatever fell hardest.
#The result was still bad in absolute terms
Neither outcome should be described as a success. Over a full decade of disciplined investing, QQQ turned $70,000 of contributions into $77,000. That is a total return of about 10 percent across ten years, and it does not account for inflation, which was substantially higher than that over the same period. In real purchasing power, both plans lost ground.
This is what a genuinely poor decade looks like for an equity investor: not a wipeout, but ten years of contributions producing almost nothing. Anyone whose plan assumes a steady 7 to 10 percent annual return should sit with these numbers, because periods like this are exactly what those long-run averages are averaging over.
The related post on the S&P 500’s lost decade covers the broad-market version of this story, including how the same period looks for a lump sum versus a contribution plan.
#What this says about the recent decade
The last ten years show QQQ beating the broad market by roughly five percentage points annualized, with concentration in mega-cap technology delivering exactly what its holders hoped for. This page covers the same two funds, the same structural difference, and a decade in which that concentration meant an 83 percent decline.
Neither decade is the truth about these funds. Together they define a range. Any conclusion drawn from one window alone is a conclusion about the window, and running both is the point of having a backtesting tool rather than a performance chart.
#What to test
- Run this same window with contribution frequency set to lump sum. The ranking reverses, and the magnitude of the reversal is the entire lesson of this page.
- Run 2000 to 2013 instead of 2000 to 2010. Extending the window a few years changes the conclusion substantially, which shows how sensitive these results are to the end date.
- Try 2000 to 2010 and 2016 to today back to back for the same two tickers.
- Watch the contributions-versus-gains breakdown in the chart. For most of this decade, gains were negative and contributions were doing all the work.
Change the contribution amount, schedule, or date range and re-run this comparison against the same historical data.
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