Behold the effect of time on markets: Allow us to explain. You’re looking at the best and worst returns of stocks (blue), bonds (green) and a mix of 60% stocks to 40% bonds (orange), over four different time frames. One-year returns are straightforward. For the 5-year returns, “rolling” means from 1973 to 1977, from 1974 to 1978, from 1975 to 1979, and so on. Same for ten and twenty years. The returns are annualized. For example, the best 10-year return for bonds was 13.6% per year. The worst was 0.9% per year. Let’s focus on the stock returns in blue, …
Last Year’s Lessons
We’ll get right to the point: In investing, forecasts and predictions are worthless. And probably, “in anything”. But for our purposes here, no one in history has been right more often than wrong in such a quantity that would force the rest of us to acknowledge the existence of a true fortune teller. Of course, a look into all past predictions is required to make this assertion. We’ve certainly written enough about it over the years to make the case. And the folly of forecasting is no secret. But a full thesis this is not. Rather, we prefer to pick …
Beyond Markets
Investing is just one spoke in the wheel As we kick off the New Year, let’s start by making sure we have a few key pieces of our financial health in order: Budgeting: Whether you’re planning short term for an upcoming vacation or home project, or long term for college or your retirement, knowing your budget is paramount. Now is a great time to revisit last year’s numbers. See what worked and what did not. Most importantly, don’t beat yourself up. Budgeting is like working out: consistency over long periods of time is what produces results. If you fell off …
Good Times, Bad Times
Folks, the S&P 500: It’s tough to imagine those bad periods, right? We’ve been in a good one for quite some time now. Of course, within all the good periods were some duds (like 2022), and within the bad, some good (like 2003). But it’s been quite a run, especially when you consider that what the S&P 500 represents – large US companies – has given us the best returns since 2013 – better than value, small cap, foreign and emerging market stocks. Therein lies the danger! While 11 years seems like a long time, a statistician will tell …