photos courtesy of Gary Morrison

Investment Winners Over Last 20 Years

by Steve on March 31, 2015

Recently I was looking at the last 20 years of investment returns for five major asset classes:

• Large U.S. stocks
• Small U.S. stocks
• Stocks of Developed Countries outside the U.S.
• Long-Term Government Bonds (20 year bonds)
• Government Bills (30-day U.S. government bills)

Over the 20-year period from 1995 through 2014, this is the number of times each asset class had the highest return for a year:

• Small U.S. Stocks 6
• International Stocks 5
• Long-Term Government Bonds 5
• Large U.S. Stocks 4
• Government Bills 0

Looking at these numbers, you can see that there was no one best asset class in which to be invested over the last 20 years. And there is little persistence. International stocks were the highest performing class from 2004—2007 and then were the worst performing asset class one year later in 2008. Small U.S. stocks were the best to own from 1995–1998 and were the worst investment in 2000.

Here’s a fun fact. In spite of a commonly held current belief, did you know that large U.S. stocks have not had the best one-year return since 1998! In 2014, the best return came from Long-Term Government bonds (23.9% return; Large U.S. Stocks returned 13.7%).

Keep this in mind the next time you’re tempted to invest heavily in one asset class because of recent performance. Our memories tend to be short and we also tend to put more emphasis on what has happened recently rather than paying attention to the long-term trend.

Words of Wisdom

by Steve on March 24, 2015

Nick Murray worked as a financial advisor for 25 years and now coaches financial advisors. He often has something interesting to say. Here are some thought-provoking comments I gleaned from a recent interview he gave.

On financial success:

“All financial success comes from acting on a plan. A lot of financial failure comes from reacting to the market.”

On ages and stages of life:

“There are about 40 million Americans between age 50 and retirement. If 1% of them have a written, date-specific, dollar-specific retirement accumulation plan, I’ll buy you a new hat! But at age 50, something really magical happens: People begin to know they’re on the last rung to retirement. A 49-year-old is thinking about a Mercedes and trips to Europe; a 50-year-old is thinking about coffee and rice, and ‘How much can I start putting away for retirement?’ ”

On the need for changing plans as circumstances change:

“It’s critical that, during the accumulation phase, people work on a plan—otherwise they’ll fail. As they approach retirement, it’s critical that they have a rational distribution plan—otherwise they’ll fail; that is, outlive their money.”

Thanks Nick. Always helpful to read your comments and thoughts.

The Most Powerful Economic Force in Your Universe

March 17, 2015

It’s a positive money mindset. Today’s blog post is not about dollars and cents (or sense), efficient market theory, spending plans, insurance or compounding. It’s about our first SmartMoney Rule – creating and holding a positive money mindset. James Allen, an early 20th century thought leader and author of the book “As a Man Thinketh” […]

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March 9, 2009

March 9, 2015

Do you know why today is special? Six years ago today, the S&P 500 index hit its low point of the Great Recession of 2007-2008. The S&P 500 index closed at 676 on that day. Last Friday, the S&P 500 index closed at 2,071. That’s a gain of a little over three times in six […]

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Continued Good News for U.S. Economy

February 24, 2015

As they do each month, the Federal Reserve Bank of Chicago published its latest findings on the state of the U.S. economy earlier this week. Here is an excerpt from their press release: “Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) edged up to +0.13 in January from –0.07 in […]

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Reflections of a Financial Blog Post Writer

February 21, 2015

I’ve taken a break from writing blog posts for a few months because I was burned out. That’s right. Even I get tired of writing about personal financial matters. The press of client work, a State of Washington audit of our business (which occurs every few years), year-end tax planning with clients and a rush […]

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November Fed Indicators Show Strong U.S. Economy

December 22, 2014

The Chicago Federal Reserve Bank publishes a wonderful “state of the economic union” monthly. Their summary, published today, shows that the U.S. economy is purring along nicely. The three-month moving average of their indicators was above the historical trend. What this holds for the future is un-clear (seeing into the future is always impossible), but […]

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Six New SmartMoney Rules™

November 22, 2014

We created the basic six SmartMoney Rules™ that we encourage our clients to practice: Protect Yourself Tie goals to your values Use cash and debt smartly Invest wisely Know how much is enough for retirement Review regularly We have six more SmartMoney Rules™ to add to the mix. These are born out of our experience […]

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Investors Are Confused

October 23, 2014

The recent stock market volatility means investors are confused. One article I read stated it nicely: “The stock market’s volatility stems from confusion as to whether the economy is too hot or too cold—and it is worried about the Fed response.” –Bill DeShurko, CFP Add to this confusion the most recent Chicago Fed report that […]

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The Most Difficult Part of Investing

August 14, 2014

Over 20 years ago, in the book “Get Rick Slowly” William Spitz wrote that, “The most difficult part of investing is understanding and evaluating risk. ” This line struck me when I was reading this wonderful book recently.  The reason that understanding and evaluating risk is so challenging is that there are many types of  […]

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