The Lesson of $1

Hypothetical value of $1 invested at the beginning of 1927 and kept invested through December 31, 2016. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. Total returns in U.S. dollars. Past performance is no guarantee of future results.
 
U.S. Stock Market represented by the Fama/French Total US Market Index Portfolio, which is an an unmanaged index of stocks representing stocks of U.S. companies. U.S. Small Cap Stocks represented by the Fama/French US Small Cap Index, which is an unmanaged index of stocks of small U.S. companies. U.S. Value Stocks represented by Fama/French US Large Value Index (ex utilities), which is an unmanaged index of stocks of large U.S. companies with low relative price, excluding utilities companies. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Long-Term Government Bonds, One-Month U.S. Treasury Bills, and U.S. Consumer Price Index (inflation), source: Morningstar’s 2016 Stocks, Bonds, Bills, And Inflation Yearbook (2016). Indexes are unmanaged baskets of securities that investors cannot directly invest in. Index performance does not reflect the fees or expenses associated with the management of an actual portfolio.
The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal. Bonds are subject to market and interest rate risk. Bond values will decline as interest rates rise, issuer’s creditworthiness declines, and are subject to availability and changes in price. T Bills and government bonds are backed by the U. S. government and guaranteed as to the timely payment of principal and interest. T Bills and government bonds are subject to interest rate and inflation risk and their values will decline as interest rates rise. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.

Hypothetical value of $1 invested at the beginning of 1927 and kept invested through December 31, 2016. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. Total returns in U.S. dollars. Past performance is no guarantee of future results.
 
U.S. Stock Market represented by the Fama/French Total US Market Index Portfolio, which is an an unmanaged index of stocks representing stocks of U.S. companies. U.S. Small Cap Stocks represented by the Fama/French US Small Cap Index, which is an unmanaged index of stocks of small U.S. companies. U.S. Value Stocks represented by Fama/French US Large Value Index (ex utilities), which is an unmanaged index of stocks of large U.S. companies with low relative price, excluding utilities companies. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Long-Term Government Bonds, One-Month U.S. Treasury Bills, and U.S. Consumer Price Index (inflation), source: Morningstar’s 2016 Stocks, Bonds, Bills, And Inflation Yearbook (2016). Indexes are unmanaged baskets of securities that investors cannot directly invest in. Index performance does not reflect the fees or expenses associated with the management of an actual portfolio.
 
The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal. Bonds are subject to market and interest rate risk. Bond values will decline as interest rates rise, issuer’s creditworthiness declines, and are subject to availability and changes in price. T Bills and government bonds are backed by the U. S. government and guaranteed as to the timely payment of principal and interest. T Bills and government bonds are subject to interest rate and inflation risk and their values will decline as interest rates rise. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.

[/caption]One of the best opportunities to grow your money over the long term may come from making an investment in the stock market.
 
This chart illustrates the long-term growth of U.S. businesses over the past 90 years. If your grandparents had invested $1 in the U.S. Stock market, as measured by the Fama/French Total US Market Index, in 1927 and just left it alone, by the end of 2016 that $1 would have grown to $5,106. Invested in U.S. Small Cap Stocks, as measured by the Fama/French US Small Cap Index, that $1 would have grown to $24,586, and $8,050 if invested in U.S. Value Stocks, as measured by the Fama/French US Large Value Index. That same $1 invested in One-Month T-Bills would be worth $20 and if invested in Long- Term Government Bonds it would be worth $125.
 
Those who invested $1 back in 1927 would have had plenty of reasons to want to pull out of the market along the way — The Great Depression, World War II, Korea, Viet Nam, stagflation, the Great Recession — but by staying invested they could take advantage of every market recovery.
 
While we can never be certain about market direction in the short term, over the long-term we believe patient investors will be rewarded for staying invested.
 
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It’s Always a Good Time to Talk About Risk and Volatility


 
In the 68 trading days in the U.S. stock market from 11/11/16 to 2/17/17, the Dow Jones Industrial Average (DJIA) set new all-time high records on 26 of those days. In the last seven consecutive days over the same period, the Dow closed at a new record every day. Continue reading

The Dow Jones Hit 20,000…Does it Really Matter?

I well remember when the Dow Jones industrial average reached 10,000 in 1999, as I was working at Dow Jones Indexes at the time. It had been more than 100 years since Charles Dow created his venerable stock “average” and we were approaching a historic milestone. The exuberant 90s were in full swing and the stock market had more than doubled the prior four years. Continue reading

Hindsight is Clearer Than Foresight

This article is featured in the winter edition of our 360 Insights Quarterly Client Newsletter.
 
Predictions on November 7, 2016, the day before voters elected Donald Trump as our next president…
 
“As the historic 2016 U.S. presidential election approaches, major Wall Street analysts agree that the S&P 500 will likely sell off if Donald Trump wins, and at least hold gains if Hillary Clinton wins.” CNBC
 
Continue reading

The Future Isn’t What It Used to Be — The Great Predictive Failures of 2016

360_perdiction_blog_image_v2This article is featured in the winter edition of our 360 Insights Quarterly Client Newsletter.
 
The New York Post headline the day after the 2016 U.S. elections put it best: “Pundits, Polls, Politicians, the Press: EVERYONE WAS WRONG.”
 
From the U.S. elections to Brexit to economic doomsaying, 2016 saw a series of spectacularly erroneous predictions. Again and again, experts were proven wrong and had to scramble to explain why they had missed the mark so badly. Continue reading

Follow a Forecaster or Flip a Coin?

This blog was originally published in December, 2014
 
Do you have a favorite forecaster? If so, when is the last time you checked his or her track record? You probably should because research exists that shows professional forecasters are about as accurate, on average, as a coin flip.
 
The chart below is the result of an ongoing analysis of equity market experts and their forecasts — the so-called stock market gurus. Analysts collected data from market forecasters since 1998. They tracked and graded the forecasts, based upon accuracy, made by dozens of popular gurus over the years. And the results aren’t good! The “experts” accurately predicted market directions only 48% of the time — about as accurate as a coin flip. Continue reading