total returns over the last 9 years

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date total returns over the last 9 years beliavsky 03-26-2008  Re: total returns over the last 9 years Tad Borek 03-26-2008  Re: total returns over the last 9 years beliavsky 03-27-2008  Re: total returns over the last 9 years mike742 03-27-2008  Re: total returns over the last 9 years Augustine 03-26-2008  Re: total returns over the last 9 years rick++ 03-27-2008  Re: total returns over the last 9 years HW \"Skip\" Wel... 03-27-2008  Re: total returns over the last 9 years Rich Carreiro 03-27-2008  Re: total returns over the last 9 years Ron Rosenfeld 03-28-2008  Re: total returns over the last 9 years Elizabeth Richa... 03-27-2008  Re: total returns over the last 9 years Elizabeth Richa... 03-27-2008
Posted by on March 26, 2008, 11:57 am Today's (Mach 26) Wall Street Journal says the annualized total percentage returns of various asset classes since March 1999 have been 2.46 S&P 500 7.18 Foreign country developed stocks 7.68 U.S. Long-Term Treasury Bonds 8.42 Inflation-Protected Treasury Bonds 11.92 U.S. Small Stocks 14.11 REITs 14.51 Gold 17.92 Commodities 19.38 Developing-Country Stocks I think part of the reason for the poor performance of the S&P 500 since then is that it was priced too high. Financial planners need to forecast future long-term returns based on current valuations rather than just extrapolating the past long-term averages, which would suggested a heavy stock weighting in March 1999. I'm not suggesting avoiding large-cap stocks now. FWIW, I am bullish, especially relative to Treasury bonds. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Tad Borek on March 26, 2008, 4:10 pm beliavsky@aol.com wrote: > Today's (Mach 26) Wall Street Journal says the annualized total > percentage returns of various asset classes since March 1999 have been > > 2.46 S&P 500 > I think part of the reason for the poor performance of the S&P 500 > since then is that it was priced too high. Or that a small subset of the index was priced too high. It's interesting to look at the list of the top 10 issues through time, it helps put this in perspective. This link downloads an Excel list of the top-10, through many years, from the S&P site: http://www2.standardandpoors.com/spf/xls/index/mktval_issues.xls It wasn't so much an S&P 500 issue as a Nasdaq 100 issue, though of course many non-Nasdaq stocks were swept in as well. But the S&P 500 not only inflated in valuation, but also became dominated by companies that were relatively unimportant in terms of total sales and profits and role in the US economy. Their market value (and weighting in the S&P 500) came to dominate the index. In 1999 Microsoft was #1, and Cisco, Intel, Lucent, and AOL were all on the top-10 list as well. Even Proctor & Gamble got the bump. Now, only Microsoft remains on the list and its market cap as of 12/31/07 was just more than 1/2 of what it was back in 1999. Cisco still hasn't managed to grow enough to earn even $1.50/share annually, though its price was over $70 at one point - almost 10 years ago - on the basis of its future earnings power (ostensibly). The numbers don't look quite so glum if you view the S&P 500 ex-QQQ or, even better, a large value index that dodged the fluffiest of growth stocks entirely. It reinforces the lesson that buying a stock is buying earnings and if they aren't going to be high enough, you shouldn't pay much for the stock. One might scan the current top-10 list and see if there's any relatively unimportant companies that have a place on the current list; in a way it puts 2007 vs. 1999 in perspective. I wonder what the commodity returns would be if they adjusted for the various costs associated with actual investments. It's not quite the same thing as buying and holding an index fund in the asset class for 9 years. -Tad -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by on March 27, 2008, 12:27 pm > beliav...@aol.com wrote: > > Today's (Mach 26) Wall Street Journal says the annualized total > > percentage returns of various asset classes since March 1999 have been > > >  2.46   S&P 500 > > I think part of the reason for the poor performance of the S&P 500 > > since then is that it was priced too high. > > Or that a small subset of the index was priced too high. It's > interesting to look at the list of the top 10 issues through time, it > helps put this in perspective. This link downloads an Excel list of the > top-10, through many years, from the S&P site:http://www2.standardandpoors.com/spf/xls/index/mktval_issues.xls > > It wasn't so much an S&P 500 issue as a Nasdaq 100 issue, though of > course many non-Nasdaq stocks were swept in as well. But the S&P 500 not > only inflated in valuation, but also became dominated by companies that > were relatively unimportant in terms of total sales and profits and role > in the US economy. Their market value (and weighting in the S&P 500) > came to dominate the index. > > In 1999 Microsoft was #1, and Cisco, Intel, Lucent, and AOL were all on > the top-10 list as well. Even Proctor & Gamble got the bump. Now, only > Microsoft remains on the list and its market cap as of 12/31/07 was just > more than 1/2 of what it was back in 1999. Cisco still hasn't managed to > grow enough to earn even $1.50/share annually, though its price was over > $70 at one point - almost 10 years ago - on the basis of its future > earnings power (ostensibly). > > The numbers don't look quite so glum if you view the S&P 500 ex-QQQ or, > even better, a large value index that dodged the fluffiest of growth > stocks entirely. It reinforces the lesson that buying a stock is buying > earnings and if they aren't going to be high enough, you shouldn't pay > much for the stock. One might scan the current top-10 list and see if > there's any relatively unimportant companies that have a place on the > current list; in a way it puts 2007 vs. 1999 in perspective. > > I wonder what the commodity returns would be if they adjusted for the > various costs associated with actual investments. It's not quite the > same thing as buying and holding an index fund in the asset class for 9 > years. Probably the commodity index used most often in asset allocation studies is the Goldman Sachs Commodity Index (GSCI), which S&P has now adopted. An IShare ETF tracking that index, ticker symbol GSG, has an expense ratio of 0.75% . I don't think expense ratios usually include bid-ask spreads paid, although they will affect the total returns. Any commodity index will have a heavy weight in energy and therefore oil. One could probably get some of the benefits of the commodity exposure by owning just oil futures. There are brokerage firms such as OptionsXpress (OX) that allow one to have futures positions, stocks, and mutual funds in a single account. The current market in December 2008 crude oil futures (WTI) is 101.86 (3) Ask 101.89 (1) Offered and the multiplier is $1000, so that a single contract controls about $100K of oil, and OX commissions on futures trades are about $10 per round trip. The biggest expense if one holds such a position for a year will be that OX does not pay interest on the margin one must put up, which is currently about $7400 per contract of crude oil. I estimate the annual interest expense as a fraction of notional exposure to be 0.22% if interest rates are 3%, with brokerage and bid- ask amounting to another 0.04%, adding up to 0.26% -- not that high. ======================================= MODERATOR'S COMMENT: Posters to this thread should relate comments to general financial planning. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by mike742 on March 27, 2008, 3:50 pm > $100K of oil, and OX commissions on futures trades are about $10 per > round trip. The biggest expense if one holds such a position for a > year will be that OX does not pay interest on the margin one must put > up, which is currently about $7400 per contract of crude oil. This isn't strickly true -- it's possible to use t-bills as margin and then get the interest on the margin money. The money is tied up and the t-bills have to be in the margin account. Also some cash is needed too, it can't all be t-bills. T-bill (for use as margin) policies at different commodity trading firms differ, but have some similarities. Ask your firm... -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Augustine on March 26, 2008, 5:26 pm I suspect that the best conclusion from this interesting data is not to buy this or that, but rather to DIVERSIFY! -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Similar Threads Posted Do "total returns" include fund operating expenses? May 11, 2007, 4:57 am old retirement acct: total withdrawal vs higher annuity? November 14, 2008, 12:52 pm Term Life Insurance in later years January 15, 2008, 5:15 am Need Historical Stock Data going back 20 years and with dividends reinvested, for free March 8, 2008, 7:20 pm Question about re-investing returns... 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