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Price-earnings ratio stands at 18.9 now compared with 41.4 in 1999

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Running in circles: Dow climbed back above 10,000 recently after first topping the mark in March 1999, but most sectors have actually posted positive returns

But the return to 10,000 also serves as a bitter reminder that stocks have gone virtually nowhere, on balance, for more than a decade. It was in March 1999 that the Dow first climbed above 10,000, before soaring as high as 14,164 two years ago and plummeting as low as 6,547 this past March.

Of course, the Dow gauges only stocks in the US, and a fairly narrow band of the market at that. And while domestic shares have appeared to run in circles for more than a decade, many global stock markets have prospered.

Look a bit deeper, though, and you'll find that there have been some changes in the domestic market, too, in the last 10 years - and largely for the better. Some of them, however, are hard to see at first glance.

For example, a majority of sectors have actually posted positive returns since the end of 1999 - in some cases sizeable gains. On average, including dividends, energy stocks have returned nearly 150 per cent, shares of consumer staples companies (like Procter & Gamble and others that sell necessities) have gained nearly 65 per cent and utility stocks have risen nearly 50 per cent.

'The reality is that stocks are like any other asset. If you buy them at expensive prices, you'll have to wait a long, long time to get rewarded.' - Robert D Arnott of Research Affiliates

'That's hardly what I would call a lost decade,' said James W Paulsen, chief investment strategist at Wells Capital Management in Minneapolis.

Market valuations are another consideration. By almost every measure, stocks are far cheaper at Dow 10,000 today than at Dow 10,000 in March 1999.

Back then, the price-to- earnings ratio for domestic stocks stood at a very high 41.4. That's based on 10-year average earnings, a conservative measure that smoothes out short-term swings in corporate profits. Since then, using the same measure, the market's P/E has fallen to 18.9. While that's not necessarily a screaming bargain - the market's long-term average is closer to 16 - stocks are trading at a discount of more than 50 per cent to their 1999 prices.

'The reality is that stocks are like any other asset,' said Robert D Arnott, chairman of Research Affiliates, an investment consulting firm in Newport Beach, California. 'If you buy them cheap, there's a good chance you'll be happy very quickly. But if you buy them at expensive prices, you'll have to wait a long, long time to get rewarded. That's what investors have learned in the past decade.'

Perhaps the most important change is the one that has occurred in many portfolios. Investors are generally more diversified today than they were a decade ago - and that has helped many households make money in an equity market that has been in neutral over all.

Consider that in 1999, four economically sensitive sectors - technology, financial services, telecommunications and consumer discretionary stocks (which include automakers) - made up nearly two-thirds of the overall market.

Those four areas also happened to be the four worst-performing groups over the last 10 years. Since the end of 1999, tech and telecom shares have lost nearly 8 per cent, annualised, according to Standard & Poor's. Financial shares, meanwhile, have fallen almost 3 per cent a year, on average, and consumer discretionary stocks are down nearly 2 per cent, annualised, S&P says.

Today, these four sectors make up less than half of the market.

At the same time, weightings have grown modestly in traditionally defensive areas of the market like health care, consumer staples and utilities. In fact, those three sectors now make up nearly a third of the S&P 500-stock index, up from less than 19 per cent in 1999.

Diversification goes well beyond just sectors. Back in the late '90s, investors held about US$1 in foreign stocks for every US$8 held in domestic equities. That isn't terribly surprising, in that the domestic stock market back then was routinely delivering 20 per cent plus annual returns. Today, that ratio of foreign stocks to domestic shares stands at 1 to 3. -- NYT