News & Insights

Stock Returns – The Uncommon Average

by Jim Freeman, CFP® on 11/10/2017

The US stock market has delivered an average annual return of around 10% since 1926 (as measured by the S&P 500 Index through 2016). But short-term results may vary, and in any given period stock returns can be positive, negative, or flat. When setting expectations, it’s helpful to see the range of outcomes experienced by investors historically. For example, how often have the stock market’s annual returns actually aligned with its long-term average?

Exhibit 1 shows calendar year returns for the S&P 500 Index since 1926. The shaded band marks the historical average of 10%, plus or minus 2 percentage points. The S&P 500 had a return within this range in only six of the past 91 calendar years. In most years the index’s return was outside of the range, often above or below by a wide margin, with no obvious pattern. For investors, this data highlights the importance of looking beyond average returns and being aware of the range of potential outcomes.

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posted in BlogInvestments

Thoughts on S&P’s decision to exclude non-voting stock from indexes

by Chris Jaccard, CFP®, CFA on 8/3/2017

This week the company that maintains the S&P 500 index announced that they will start excluding companies from their indexes that issue multiple classes of shares.  So newer issues of stock from companies like Snap Inc. (SNAP) – that do not have voting rights – will not be included in many popular indexes.  This follows similar statements from FTSE Russell and MSCI earlier in the year.

These announcements highlight a couple of key reminders for investors.  First, there is a significant human element even with indexes that claim to be strictly rule-based.  Second, although index providers and professionals agree that corporate governance matters, there is no consensus on how to encourage better practices while still maintaining indexes that represent public companies.

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posted in BlogInvestments

Prediction Season

by Jim Freeman, CFP® on 12/16/2016

stockpredictionIn one of our newsletters from October, we included an article entitled, “Presidential Elections and the Stock Market”. The conclusion of the article was:

Trying to make investment decisions based upon the outcome of presidential elections is unlikely to result in reliable excess returns for investors. At best, any positive outcome based on such a strategy will likely be the result of random luck. At worst, it can lead to costly mistakes. Accordingly, there is a strong case for investors to rely on patience and portfolio structure, rather than trying to outguess the market, in order to pursue investment returns.

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Interesting Article: Hold Your Nose and Buy Europe

by Jim Freeman, CFP® on 6/17/2016

Jason Zweig wrote an interesting article in the May 28th Wall Street Journal entitled, “Hold Your Nose and Buy Europe.”  Zweig says that as investors search for bargains in a world of overpriced assets, they should be guided by the EMH. That isn’t the Efficient Market Hypothesis, which holds that the price of a security reflects all available information but instead Zweig’s own Emetic* Market Hypothesis, which says if the mere thought of owning an asset turns your stomach, that probably is a sign to buy it.

*Emetic – a medicine or other substance that causes vomiting.

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Beware the Rollover Offer: 5 Important Questions to Ask

by Chris Jaccard, CFP®, CFA on 5/28/2016

Last week, one of my aunts asked me about rolling over an old 401(k) plan.  She had been getting calls from a friend saying she can get up to $8,000 in bonuses/incentives if she does the rollover now.  Wow, I thought, this is way beyond the usual $100 or $200 cash offers I’ve seen.

New Law Not in Full Effect

My remark to her was – Beware!  I told her of the new law I wrote about last month, and that we recently learned that the protections actually don’t come into full effect until April 2017.

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posted in BlogInvestmentsPersonal Finance

New Department of Labor Rules Coming Soon

by Chris Jaccard, CFP®, CFA on 4/4/2016

The Department of Labor is coming out with new rules in the next couple of weeks that some in the financial services industry have said is the most disruptive piece of regulation to come down since 1974.  What will it say?

It will basically require that financial advisors act in their clients’ best interests – as a “fiduciary” – when advising on company retirement plans such as 401(k) plans.  Currently, advice on these plans only has to be “suitable”, which can lead to the sale of expensive or inferior investment products.

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posted in BlogInvestmentsPersonal Finance

S&P 500 Annual Returns and Intra-Year Declines

by Jim Freeman, CFP® on 11/2/2015

Last quarter the US stock market as measured by the S&P 500 experienced its first 10% correction since 2011. As you can see from this graph, “Annual Returns and Intra-Year Declines” these types of fluctuations are normal and to be expected. The red dot and red negative numbers on the graph show the largest peak to trough drop during each year and the black bars and black numbers show the total returns for each year. The total returns shown here do not include dividends.

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Five Investments to Consider at 50

by Chris Jaccard, CFP®, CFA on 8/11/2015

Age 50 is great time to a take a look at your retirement trajectory, and re-evaluate your financial circumstances:

1. Invest in Your Career

At 50, you have probably gotten close to your lifetime peak earnings level – it’s a good time to objectively evaluate your position, and decide how to approach the next decade or two of working years.  Have you been itching for a career change?  Are you being paid what you’re worth?  If you are eligible for a traditional pension plan, look into how your benefit is calculated – to best take advantage given your circumstances and goals.

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posted in BlogInvestmentsPersonal Finance

Returns for Globally Diversified Portfolios in 2014

by Jim Freeman, CFP® on 1/16/2015

Returns for globally diversified portfolios were low in 2014. We periodically refer to GMO (a Boston based investment manager) for their asset allocation insights and their 7-year return forecasts. GMO also manages two globally diversified asset allocation funds. Although GMO has a solid performance track record, in 2014 their Benchmark Free Allocation Funds (GBMFX) had a return of 1.21% and their Global Asset Allocation Fund (GBMBX) had a return of 1.31%.

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The ABCs of Mutual Fund Share Classes

by Chris Jaccard, CFP®, CFA on 11/19/2014

You don’t need to read a prospectus to benefit from knowing the basics about mutual fund share classes. It will help you uncover your actual investing costs (especially when dealing with a broker), avoid unnecessary fees, and boost long-term performance. As you will see, even after you select a fund, it is crucial that you choose the most appropriate share class of that fund.

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Posts are general in nature and do not constitute the rendering of legal, investment, accounting or other professional advice.