Posted on

Inflation…Does it Affect the Stock Market?

A question that I have received more and more often from clients is “how will high inflation impact the stock market?”  Inflation has definitely been in the news lately, and it can be an alarming thing.   As you can see in the chart below, the inflation rate has increased from 1.2% a year ago, to 5.4% as of last month.  

Predicting the future is a hard thing to do, so I don’t know what the future will hold, but we do know that inflation has already taken a toll on our buying power as consumers.

Inflation’s Impact on the Stock Market

A big narrative in my industry is that high inflation is a bad omen for the stock market.  The problem is, looking at historical data, the numbers don’t really go along with that narrative.   This chart compares the yearly S&P 500 return (Large US Stock Market) to the inflation rate. 

There is no pattern that I can see.  Some high inflation years were indeed negative, but a bunch of them were huge positive years for the stock market.   

If we look into the actual numbers from the highest inflation rate years throughout history, there is further proof that no major correlation exists. 

More than 1/3 of these high inflation years produced a greater than 20% return from the stock market. 

Also, the average stock market return during these years was 9.4%, almost identical to the long term average of the S&P 500.

What not to do during High Inflation

The last thing you want to do with long term money during periods of high inflation, is pull your money out of the stock market, and put it in the bank/cash/CD’s.   Especially now, with interest rates so low, it is challenging to keep up with inflation if your money is just sitting there not really growing. 

The Best Hedge Against Inflation

In my opinion, the best hedge against inflation is to invest in stock based mutual funds that are extremely diversified and ride out any short term volatility.   Is it guaranteed to beat inflation?  No.  But it has a much better chance to beat inflation then a CD at a bank, or pretty much anything else for that matter. 

By Jimmy Hancock

References-

  1. “United States Inflation RATE2021 DATA: 2022 Forecast: 1914-2020 Historical.” United States Inflation Rate | 2021 Data | 2022 Forecast | 1914-2020 Historical, https://tradingeconomics.com/united-states/inflation-cpi.
  2. Posted October 24, 2021 by Ben Carlson. “Inflation vs. Stock Market Returns.” A Wealth of Common Sense, 24 Oct. 2021, https://awealthofcommonsense.com/2021/10/inflation-vs-stock-market-returns/.
Posted on

Cryptocurrency: Are you missing out?

bitcoin; cryptocurrency

Do you suffer from FOMO?  FOMO stands for Fear Of Missing Out.  Just about everyone suffers from this in one way or another.  Bitcoin and Dogecoin, among other cryptocurrencies have become household words and their popularity is exploding. So what is cryptocurrency, and is it something you should invest in?

What is cryptocurrency?

Cryptocurrency is a form of currency that only exists in numbers on a computer screen, rather than an actual coin or physical dollar bill. It is a form of international currency and it is the first decentralized digital currency in the world.   You can buy cryptocurrency from any online seller, by trading your dollars for whatever cryptocurrency you choose.  Bitcoin was the first cryptocurrency, but there are many other types of cryptocurrency now trying to surpass bitcoin in popularity.  As of right now, most people view cryptocurrency as an investment more than as an actual currency.

Why is Crypto so popular right now?

The price of 1 Bitcoin started out close to $1 back in 2011, and now the price of 1 bitcoin is about $38,000. Even just a few weeks ago it was around $60,000!  That is some pretty extreme price fluctuation.  So yes, some people have made a fortune if they got in before it was cool.   Other types of Cryptocurrency like Dogecoin, and Etherium have also seen some decent growth recently in terms of price.   But the swings are pretty wild, with huge percentage drops following huge run ups.

Should you invest in (buy) Cryptocurrency?

Investing in cryptocurrency is much more similar to gambling, than it is to investing in diversified stock based mutual funds.   Yes, if you mortgage your house to buy Bitcoin now, you could be filthy rich in a year, but you could also be completely broke too.   There is so many regulatory issues that crypto has not made it through yet, and there have been several instances of price manipulation and fraud.   If a “bad guy” wanted to commit a financial crime and fly under the radar, cryptocurrency seems to be the easiest way to go.

My main suggestion when it comes to cryptocurrency is to only use money that you absolutely do not need and could live without to invest in it.  If you like thrill rides and want to try it out, go right ahead, but not with grocery or retirement money.

I have personally been watching the prices of the popular cryptocurrencies over the last few months, and the price swings have been pretty extreme on a daily basis.  The price volatility seems to be about 10 times more extreme than the price volatility of the stock market.

For me there is still far too much uncertainty when it comes to investing in cryptocurrency.  I don’t personally own any, and I advise clients, friends, and family to stay away when they ask me about it.

Buying Bitcoin without actually Buying Bitcoin

The prudent way to invest in cryptocurrency, is by investing in a globally diversified stock portfolio.  In this way, you are in turn investing in lots of companies that buy, sell, and accept cryptocurrency.  In this way you take a lot of the risk out of it, and get more steady returns.  Your Fear Of Missing Out thirst might not be quenched, but you will be able to sleep better at night and still get a pretty good long term return.

By Jimmy Hancock

References

  1. Ramsey Solutions. “What Is Cryptocurrency and Should I Invest in It?” Ramsey Solutions, Ramsey Solutions, 13 May 2021, www.ramseysolutions.com/retirement/investing-in-cryptocurrency.
  2. “Yahoo Finance – Stock Market Live, Quotes, Business & Finance News.” Yahoo! Finance, Yahoo!, finance.yahoo.com/.

 

Topic: TBD

Wednesday June 23, 2021 6:30 PM to 8:00 PM
 

Location: Dixie’s Diner, 2150 Channing Way, Idaho Falls 83404.

Event date is past

Thu, 02 Dec 2021 18:27:36 +0000 last time: Wed, 23 Jun 2021 18:30:00 -0600
Posted on

Short Selling, Stock Picking, and GameStop

At this point most everyone has heard of the craziness surrounding GameStop stock over the last few weeks.  There are several things we can learn from the madness.  First I will try to explain as simply as possible, what actually happened.

Retail stock market traders banded together in the Reddit forum “WallStreetBets” and decided to buy, and encourage others to buy, GameStop Stock.   The main reason they did it was because they knew many Hedge Fund managers had shorted the GameStop stock.  Shorting a stock is basically betting that the stock is going to go down.  In slightly more technical terms, it means they borrowed money to then sell the stock, in hopes to buy it back later at a lower price.   The higher demand for the stock increased the prices, which caused the hedge funds to buy the stock to decrease their risk before the stock price went even higher. This caused prices to shoot up even faster.  This compounded and went viral which caused the stock price of GameStop to go from about $40 per share, to almost $500 per share in just a few days.   Many Hedge Fund managers lost Billions.  On top of this, due to the volatility, RobinHood and a few other retail trading platforms would not allow retail investors to buy into the stock for a few days.   And now, the GameStop stock has continued a free fall back to reality, and the thousands of people who tried to jump on the bandwagon, have most likely lost a large chunk of change.  From the peak of almost $500 per share, to now under $60 per share.   That’s an over 80% drop from just a few days ago.

What can we learn?

First and foremost, short selling is not a good idea.  Short selling always involves borrowing money, selling a stock, and then you have to buy it back.   The risk is literally infinite, because there is no “max” stock price, it can just keep going up forever and ever.   Many hedge funds and riskier mutual funds use this tactic.  We have never, nor will we ever use this tactic, as it turns investing in the stock market into full out gambling.

Secondly

Playing the Individual stock ownership game is very risky.  Yes, a few people officially “got rich quick” if they were able to get in on Gamestop at the exact right moment and get out at the exact right moment.  But a majority of retail investors got in after it was in the news and now the price is already lower than it was when they got in.   Everyone thinks they can be the one to buy at $40 and sell at $500, but all too often stock pickers are the ones buying at $500 and selling back at $40.

If you pursue a stock-picking strategy, you are almost certain to lag the market.

Stock pickers always underestimate the number of variables that are involved in the pricing of stocks. There are literally trillions of variables that could occur on any given day that could change the price of a stock instantly. Stock prices are based on every single investor which all have different feelings about companies, reasons for investing, and regional bias.

The big problem for investors is that even though stock-picking is very risky and usually hurts returns, it’s extremely interesting and makes for a great conversation.

You may have decent odds at picking stocks that beat the total market before costs (just like a monkey you have a 50% chance), but it is much harder to do so after costs are added in. So lets say you happen to pick stocks well enough to boost your return by a couple of points, the expenses you rack up along the way (ie. research, trading costs, taxes, bid/ask spread) will usually more than offset your gain.

If you are trying to get rich quick, and have money to lose, then go for it.

The Opposite of Stock Picking

If you want to invest in the stock market in a way that is not similar to gambling, invest in a globally diversified portfolio managed by an investment coach that will help to educate you on the investing process. Instead of constantly turning the portfolio over by stock picking and active trading; buy, hold, and rebalance when necessary. Long term you will see the fruits of your decision.

By Jimmy Hancock

References

“GameStop Corporation (GME) Stock Price, News, Quote & History.” Yahoo! Finance, Yahoo!, 8 Feb. 2021, finance.yahoo.com/quote/GME?p=GME.

 

Posted on

How Much Will Your Social Security Benefit Be?

Understanding your social security benefit is a huge part of being prepared for retirement, and even the young generation should understand what they can expect to receive from social security.   It can be very confusing as there are many different rules and variables that go into the equation of estimating your social security benefit.

Basics

So let’s start with the basics.  Anyone who has worked 10 years or more, or is married to someone that has worked that long qualifies for a benefit.  The earliest you can start taking this monthly benefit is age 62, and the latest is age 70.   The monthly benefit is based on 2 main factors.  First, it is based on the amount of income you made throughout your working years (and thus how much you paid into the social security pot).   Second, it is based on when you choose to take your benefit, with a lower monthly payment if you start at age 62, continually growing until the maximum monthly benefit if you wait until age 70 to start your benefit.   Full retirement age, which I will discuss later, is age 67 if you were born after 1960.  If you were born in 1955 it is age 66 and 2 months, and increasing by 2 months each year until 1960.

Spousal Benefit

Spousal benefit is getting half of the Social Security benefit of your working spouse.  When you file to begin receiving social security, they will let you know if your individual benefit or your spousal benefit is higher, and automatically you will receive the higher of the two.  The spousal benefit maxes out when the non working spouse reaches full retirement age.  Thus it is not beneficial for a non working spouse to wait until age 70.

Real Numbers

You can actually run an estimate of your social security benefits on ssa.gov to see how much you could get in social security dollars.   I will give you one example I ran on the website with real numbers to show you an estimate of what you might expect with your social security benefit.

Ryder is 62 years old, and his wife Paisley is also 62.  He worked his entire life and made $60,000 a year.  Paisley only worked for 9 years, thus she does not qualify for her own benefit.  If Ryder chose to start taking his benefit today he would receive $1476/month.  If he waited until full retirement age, age 66 and 8 months, he would receive $2064/month.  And if he waited until age 70 he would receive $2627/month.

Now this is where it gets a bit confusing.  Time for some math.   If Ryder thinks he will die before age 78, he will receive the most total money from Social Security if he starts his benefit at age 62.  If Ryder thinks he will live past age 78 he will receive the most total money if he waits to start his benefit at age 70.     This is called the “break even” point.  The ages of 77 to 80 are almost always the break even years for any individual situation.

As for Paisley, if she chose to begin taking her spousal benefit at age 62 she would receive $671/month.  If she waited to full retirement age she would receive $1032/month.  And if she waited till age 70 she would still receive the same $1032/month.

Other Factors

If you plan to work in any form and are receiving income, it is not a good idea to take your social security before your full retirement age (66 or 67).  Your social security money is decreased based on the amount of income you receive.   Once you reach full retirement age, you can receive your social security benefit and it will not be effected by any income you are making.

The File and Suspend Strategy that you might have heard about, is no longer in effect and cannot be used by anyone filing for social security that was under age 66 as of April 30th 2016.

If no changes are made by the government to the social security program, it is projected that by the year 2035, there will only be enough money to pay 75% of the scheduled benefit to retirees.  1.   So in short, the younger generation cannot really count on the amount shown in the example above.

Retirement Plan

Your social security benefit will only be a small portion of what you will need to live on in retirement.  You need to have a retirement account to be your main source of retirement income if you do not have a work pension.  Whether it be a 401k, Roth IRA, or another type of account, most people need to have between $500k and $2 million saved in order to live a comfortable retirement comparable to how they lived in their working years.

If you need help figuring out social security or getting a retirement account set up to go along with your social security benefit, please contact us.

By Jimmy Hancock

References

  1. Goss, Stephen C. “Social Security Administration.” Social Security Administration Research, Statistics, and Policy Analysis, 1 Aug. 2010, www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html.
Posted on

Health Insurance Options in Idaho for 2021

As the Open Enrollment Period for enrolling in a qualified health insurance plans kicks off for 2021, I thought it would be a good time to review some basics on how health insurance in Idaho works these days.

Open Enrollment Period

If you do not currently have a health insurance plan you have until December 15th to get signed up, or else you will most likely have to wait for 2021.   If you already have a health insurance plan, the deadline to switch to a different plan is the same day, December 15th.

Who Qualifies for a premium tax credit?

APTC, or Advanced Premium Tax Credit is when your health insurance premiums are significantly reduced based on your income.  Anyone who isn’t offered coverage from work and has income between 138% and 400% of the federal poverty line(FPL) based on their family size may qualify for the premium tax credit.  If spouses and children are offered coverage from work they are not eligible for APTC.   The 2021 federal poverty line for a family of 1 is $12,760 and goes up by $4,480 for each additional person in the family. 1.   So a family of 4 can make as much as $104,800 and still qualify for a premium tax credit by being under 400% of the FPL.  In many cases if you qualify for APTC, you can get a high deductible health plan for Free or less than $100.   If you make below 138% of the FPL, you can qualify for Medicaid, adults and children.

Options for Coverage in Idaho

Options are pretty slim in most states, including Idaho.  There are 5 health insurance carriers (Regence, Mountain Health Co-op, Blue Cross, Select Health, and Pacific Source) offering individual and family coverage both on and off the Idaho Exchange(must get coverage on exchange to get APTC).     With that being said, whatever your current situation is you might be able to save money by looking into all your options.  The prices vary so much with each company each year that it is usually not in your best interest to stick with the same company year over year.  Last year, Select Health had the lowest prices in East Idaho, and now for next year, Regence has the lowest prices in East Idaho.

Saving Money

For example, I helped a family save hundreds of dollars a month by switching them from being a spouse and children on a school district employer health plan, to a family plan off the exchange with Regence, separate from their employer.  Coverage for the actual employee is usually a very good price, but if your employer offers coverage for your spouse and children, it is usually more expensive then what you could get separate from your employer.

Another option to possibly consider, is the new “Enhanced Short Term” plans available through Blue Cross and Select Health.   These plans can be renewed up to 3 years and in general are quite a bit cheaper than the on exchange plans.   These policies go through underwriting, so your price is based on your health history.   You cannot use APTC to get these plans, but if you do not qualify for a tax credit, this is a more affordable option.  These plans are also flexible in that you can start them whenever, not just January 1st.

If you need help with your health insurance I am a licensed agent  and work with the Idaho health insurance companies both on and off the exchange.

By Jimmy Hancock

References

1. “Federal Poverty Level (FPL) – HealthCare.gov Glossary.” HealthCare.gov, www.healthcare.gov/glossary/federal-poverty-level-fpl/.

Posted on

Elections Impact on the Stock Market

2020 has obviously been a crazy year, and with the Presidential Election coming up, it is not about to calm down anytime soon.  The stock market has been a thrill ride ever since late February, with a big drop and then a steady climb.  Tech stocks and Large US stocks have already made it back in the positive territory for the year, while small stocks and international stocks are still lagging.

With that as the backdrop, I have gotten the question “How will the presidential election affect the market?” pretty often.   For questions like this I am glad I have my crystal ball with me at all times so I can tell my clients exactly what is going to happen.  O wait, I don’t have a crystal ball. But we can learn from history.

Historic Election Year Returns

Looking back at election years since 1928, the S&P 500 (Large US Stocks) has had a positive return 21 times, and a negative return 3 times (1).  I think most people would find that hard to believe.

Is there significantly better or worse returns during election years or the year after an election?

The average annual return of the S&P from 1928-2017 was 9.8%. The average return during election years and during the subsequent year were 11.3% and 9.9%, with plenty of volatility. If there was truth to the above speculations, we would consistently see extraordinarily high or low returns during election year followed by a reversal the following year. The data does not bear that out, and there is nothing in the above data that should lead an investor to make any tactical changes to their portfolio during or after election years. (3)

Republican vs Democrat

This is another interesting topic that divides people throughout the country, but is there any stock market effect based on which party gets into power?  The data actually surprised me.  From 1926 to 2019, we have had a Republican president for 46 years, and a Democratic president for 48 years.  The average annual return for the S&P 500 index when we had a Republican President was 9.12%. When we had a Democratic President, the S&P 500 averaged 14.94% per year. (2)

Whatever your political leanings are, this should give you solace knowing that average returns are over 9% long term no matter which party is in the white house.

False Patterns

The worst thing an investor can do is get caught up in trying to find and take advantage of patterns in the stock market.  It seems like a good idea, but trust me, it is not in your best interest.   For example, there is a super bowl stock market predictor, which states that if the team that wins the Superbowl is a team that had its roots in the original National Football League, then the stock market will decline.   There is another pattern showing that every mid decade year ending in 5 (1905, 1915, 1925 etc.) since 1905, has been an up year for stocks. (1)  These patterns are just random facts that people try to turn into something that seems important.

The Story of 2016

The 2016 election was a great example of this. Many financial experts and talking heads were predicting a decline in the market if Trump won. On Fortune.com, Katie Reilly reported that Citigroup predicted that a Trump win would have a negative effect on the stock market, believing the S&P 500 index would fall 3% to 5% if Trump was elected. Evelyn Cheng reported on CNBC the day before the election that JP Morgan, Barclays, Citi, and BMO all expected a Trump victory would have a negative impact on the stock market, with Barclays being as bold as saying the S&P 500 could potentially fall 11 to 13 percent. Some went even further with their market predictions.

In an interview with Neil Cavuto, noted billionaire Mark Cuban stated:

“In the event Donald wins, I have no doubt in my mind the market tanks,” Cuban said. “If the polls look like there’s a decent chance that Donald could win, I’ll put a huge hedge on that’s over 100% of my equity positions… that protects me just in case he wins.”

To the surprise of these pundits, the opposite occurred.  In just 2 months from November 1st through the end of the year, equity markets had a substantial growth period, with the S&P rising 6%, the Russell 2000 up 14% and the Russell 2000 Value increasing by 18%. (3)

In Conclusion

So the best and most honest answer to the question “How will the presidential election affect the market?”, is “I don’t know, but over the long term, stocks have made between 9 and 12% per year on average.”

By Jimmy Hancock

References

1.Anspach, Dana. “How Does the Stock Market Perform During Election Years?” The Balance. About Inc., 16 Oct. 2016. Web. 01 Nov. 2016.

2.French, Bob. “Are Republicans or Democrats Better for the Stock Market?” McLean Asset Management, 10 July 2020, www.mcleanam.com/are-republicans-or-democrats-better-for-the-stock-market/.

3. Gatliff, Kenny. On the Money, 23 Sept. 2020, on-themoney.com/2020/08/11/presidential-elections-and-the-market/.

Posted on

Stocks vs Real Estate

The comparison is often made between investing in Real Estate vs investing in the Stock Market.   There are many strong points to both arguments, but as an Investment Advisor, I am going to argue the side of why the stock market is a better long term investment.  Note, I am not inferring you should not buy a home, nor am I inferring that you should exclusively put all of your money in the stock market.  This argument is just in terms of where you should put extra money that you would like to grow for retirement or other purposes.

Here are 6 advantages of investing in stocks over investing in real estate.

1.Effort/Work

Whether you are flipping homes, renting properties, or developing land, there is a whole lot more hands on work and extra time as compared to ownership of stocks.  If you have an investment advisor, you could realistically spend absolutely no time “working” on your stock ownership and still get the growth of the market.   Lucky for you, stocks don’t have furnaces that break, or water pipes that leak.

2. Diversification

Diversification is a very important concept.  The old saying is don’t put all your eggs in one basket.  Diversification in Real Estate would involve buying homes, apartments, commercial property, and farm land etc., all in different areas of the country.   You would have to have quite a bit of money to be fully diversified.  With the stock market, if you are invested in a Matson Money Fund, you can start with one dollar and be invested in about 12,000 stocks throughout the world.

3. Liquidity

Liquidity is how easy it is for you to sell.   Stocks are extremely liquid, with most stocks being sold within seconds of offering them for sale.   With Real Estate, it can take weeks, months, or sometimes years to sell or rent out a property.

4. Costs

The cost of owning property could include all or most of the following; real estate agent fee, property taxes, maintenance, utilities, mortgage interest, and insurance.   The cost of owning stocks usually only includes an investment advisor fee, and mutual fund management fee.

5. Debt

When investing in real estate it is almost always tied to taking on debt, because of the large amounts of money needed to buy a property.   Taking on debt automatically increases the risk level with any investment.   With stock based mutual funds, you can start with $1, and never have any debt to worry about.

6. Return

There is a lot of variables that come into play when comparing returns of real estate investing vs stock based mutual funds.  You can really cherry pick numbers to make either side look much better than the other.  Just comparing actual long term growth in prices of real estate vs prices of stocks, stocks win that competition easily.  But if you include rental income, it can obviously increase your overall real estate investment return. With that though, you have to consider the risk of not being able to rent it out.

If you are looking for a way to get a high return with lower risk and little hassel, my opinion is that your #1 option is to put your money in stocks, via a diversified Roth IRA or 401k.

Feel free to comment with your thoughts.

By Jimmy Hancock



References

  1. Kennon, Joshua. “Should You Invest in Real Estate or Stocks?” The Balance. N.p., 17 Oct. 2016. Web. 12 May 2017.

Built To Last-Engineering a Portfolio to Survive a Volatile Market (Zoom Meeting)

Wednesday August 12, 2020 3:00 PM to 4:00 PM
 

In this webinar I will be discussing how you can create a mix of investments to get the best possible return during up markets and during down markets. I will discuss recent trends and types of stocks that have done well lately and compare them with long term trends. I will help you to be educated and find peace of mind in your investment/retirement journey.

Event date is past

Thu, 02 Dec 2021 18:27:36 +0000 last time: Wed, 12 Aug 2020 15:00:00 -0600

Event Types:

Posted on

Large Stocks vs Small Stocks: Does the Last 3 Years Change Things?

Looking back at the last few years, small stocks have been under performing by a big margin compared to large stocks.   Is this just a short term fad or is this a bandwagon that you need to jump on?

The S&P 500 is a grouping of the 500 largest companies in America.  It is a very popular thing to invest in for many reasons.  First of all, it is made up of incredible companies that we all know and love like Google, Walmart and Apple.

Here is a chart showing 2017-2019 average annual returns from these different US stock categories.

 US Markets Annualized Return (%)
S&P 500 Index 15.27%
Dimensional US Large Cap Value Index 8.46%
Dimensional US Micro Cap Index 6.85%
Dimensional US Small Cap Index 6.75%
Dimensional US Small Cap Value Index 3.32%

Obviously the S&P 500 has done amazing, while the other categories have done below their long term averages.     This can sometimes lead to a problem called recency bias.   Recency bias is a form of timing the market and investing in what has done well recently.   We believe it can be detrimental to your long term investment strategy.

Different categories of stocks have returns that come at different times and for different reasons.   Our main job as investment coaches is to keep you diversified and disciplined during crazy times like this.   This has happened before, and it looked almost the same as it does in the chart above.

From 1995-March of 2000, the S&P 500 was the best category of stocks by a wide margin.  The next closest category was over 4% lower annually, with most of the other categories being 14% or more lower annually vs the S&P 500 during that time.     Then for the next 10 years starting in march of 2000, the S&P 500 was the only stock category that had a negative return.   Yes, it lost money over a 10 year period.  But International Small Value stocks were up over 14% per year during that same period and US Small Value stocks were up  over 11% per year.

The stock market is random and unpredictable in the short term.  It really does take patience to be a successful long term investor.  I know, just like you, how frustrating it is to see other people having great returns while I am not.

Below is a chart showing a longer term history, and the returns of each category, including international categories from march of 2000-through the end of 2019.

Markets Annualized Return (%)
Fama/French US Small Value Research Index 10.75%
Dimensional International Small Cap Value Index 10.51%
CRSP Deciles 9-10 Index 8.81%
Dimensional International Small Cap Index 8.79%
CRSP Deciles 6-10 Index 8.32%
Fama/French International Value Index 7.53%
MSCI Emerging Markets Index (gross div.) 6.99%
Fama/French US Large Value Research Index 6.76%
Dimensional International Large Value Index 6.14%
S&P 500 Index 6.01%
MSCI EAFE Index (net div.) 3.36%

You can see that the S&P 500 has been the second lowest category over this last 20 year period.

We keep our clients invested in the S&P 500, but we overweight towards small and value, because their long term returns have been higher.

Although the S&P 500 is popular, and has been up lately, that doesn’t mean you can forget the long term projections and academic studies that have proved again and again that an efficient diversified portfolio beats the S&P 500 in the long term.

By Jimmy Hancock

References

  1.  Matson Money. Three warning signs you may be speculating and gambling with your money powerpoint. N.p.: Matson Money Inc., 29 June 2020. PPT.