Most consumers with brokerage accounts and retirement plans have received their statements for the end of June. Most look at them, others file them without even opening the envelope. Provided this second group has a very good advisor, they most likely have the portfolios that have performed the best.
Many other consumers are in shock. Most of these are the ones who follow the talking heads on TV who provide entertainment under the guise of investment advice.
The U.S. equity markets have been in the tank for about ten years now. Let's take a 40 year look at history. From 1969 to 1982, the Dow Jones Industrial Average of 30 stocks, most commonly called the Dow, returned just over 5% annually. From 1982 until 2000, the Dow's return was in the double digits, starting at 882 on January 4, 1982, and finishing at 10,786 on December 29, 2000, for an annualized return of 14.10%.
On January 1, 1999, the Dow stood at 9184, and closed at 11,350 on June 30, 2008. This represents an annualized return of 2.3%, most of it attributable to calendar year 1999. Over the same time period, the Standard & Poor's 500 averaged a return of just 0.40% per year, and the NASDAQ Composite did the same, returning about 0.40% annually.
Simply put, the equity markets over the last almost ten years have gotten us almost nowhere. Of course, built into these returns is the worst bear market, the tech meltdown of 2001-2002, since the early 70's.
If you are in positive territory with your portfolio, on an annual basis, over the last ten years, be grateful. If you don't know whether you are or not, or whether your portfolio is moving you to where you need to be financially, it may be time to find a new advisor.
In the current conditions, what should our approach be? Now is the time to be diligent in making selected purchases. Many solid companies are on sale, and we believe this to be a most excellent time to buy, not sell.
What's your take?
Until next time...
Randy
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