Active managers have generally not outperformed the market in either bull or bear markets. During the 2008 financial crisis, actively managed funds underperformed the S&P 500 index by an average of 1.67% on average. Studies from 2008-2012 also found that the majority of active managers failed to outperform their benchmarks across various market categories. While markets have historically delivered positive returns, it is typically a small group of top-performing stocks that drive those returns, making it difficult for managers to consistently pick winners. Diversification can help reduce risk and volatility compared to investing only in stocks, as seen during the 1973-1976 and 2007-2011 periods where a diversified portfolio lost less than a pure stock portfolio.
Five years after the worst economic crisis of our lifetimes, we are still feeling the after-shocks around the world.
Our recent financial past seems to herald one certainty for our collective
financial future: The investment world we grew up with has changed utterly.
Conventional wisdoms shaped by decades of high-return investing — first in equities from 1982 to 2000, then in fixed income markets over most of this century — need to be reexamined, revised, or even scrapped.
Five years after the worst economic crisis of our lifetimes, we are still feeling the after-shocks around the world.
Our recent financial past seems to herald one certainty for our collective
financial future: The investment world we grew up with has changed utterly.
Conventional wisdoms shaped by decades of high-return investing — first in equities from 1982 to 2000, then in fixed income markets over most of this century — need to be reexamined, revised, or even scrapped.
There is a cost to indexing that most investors are unaware of. It is called “reconstitution.”
A blog post is scheduled for 8 Feb 2017 discussing this article.
http://wp.me/p2Oizj-Hh
The article discusses an alternative approach to experiencing the costs of index reconstitution, called “Asset Classes,” which allow the fund manager broader leeway as to when to buy or sell, along with a broader range of holdings. This discussion begins in the section called “Decision Two: Indexing or Asset Class Investing?”
The Asset Class approach, also referred to by others as "Factor Investing," is based on what has become to be called “Evidence Based Investing” due to roots discussed in the linked "Factor Investing" article, that come from academic (peer reviewed and repeatable results) foundation that continues to this day.
My blog post discussing this article is scheduled to post 8 Feb 2017 http://wp.me/p2Oizj-Hh
Saving With Negative Real Interest RatesInvestingTips
As historically low interest rates persist and inflation accelerates, saving with negative real interest rates becomes increasingly futile.
https://youtu.be/d9qhofw8ZVc
The last decade has been a challenge for many investors, especially those investing for the long term and retirement. Given declines in global stock markets, many investors have seen little to no real growth in their portfolios over this period. This Wealth Guide explains why investors’ portfolios may underperform in both bear and bull markets and incur substantial costs in the process. It also details the impact this chronic underperformance can have on achieving long-term financial goals.
For more free wealth management guides on portfolio performance and for expert consultation, visit SolidRockWealth.com.
Developing an Asset Allocation Strategy and the Military Familymilfamln
This webinar discusses asset allocation, diversification and strategies to implement an individualized investment plan https://learn.extension.org/events/1715
Building and Maintaining a Private Market Portfolio: Inroduction to Private M...BrookePollack
CTC Consulting White Paper: Introduction to private market portfolio management and cash flow characteristcs of these investments for long-term private market investors.
Commodities managers may in fact benefit from a distinct advantage over their equity and fixed income peers – that is they seem to have a credible information advantage.
DSP World Mining Fund - An Open Ended Fund Of Funds Scheme investing in Mining Companies through International Funds
This Open-ended Fund of Funds Scheme is suitable for investors who are seeking*:
1. Long-term capital growth
2. Investment in units of overseas funds which invest primarily in equity and equity related securities of mining companies
3. High Risk**
*Investors should consult their financial advisors if in doubt about whether the Scheme is suitable for them.
**Risk may be represented as:
Low: Investors understand that their principal will be at low risk
Moderately Low: Investors understand that their principal will be at moderately low risk
Moderate: Investors understand that their principal will be at moderate risk
Moderately High: Investors understand that their principal will be at moderately high risk
High: Investors understand that their principal will be at high risk
There is a cost to indexing that most investors are unaware of. It is called “reconstitution.”
A blog post is scheduled for 8 Feb 2017 discussing this article.
http://wp.me/p2Oizj-Hh
The article discusses an alternative approach to experiencing the costs of index reconstitution, called “Asset Classes,” which allow the fund manager broader leeway as to when to buy or sell, along with a broader range of holdings. This discussion begins in the section called “Decision Two: Indexing or Asset Class Investing?”
The Asset Class approach, also referred to by others as "Factor Investing," is based on what has become to be called “Evidence Based Investing” due to roots discussed in the linked "Factor Investing" article, that come from academic (peer reviewed and repeatable results) foundation that continues to this day.
My blog post discussing this article is scheduled to post 8 Feb 2017 http://wp.me/p2Oizj-Hh
Saving With Negative Real Interest RatesInvestingTips
As historically low interest rates persist and inflation accelerates, saving with negative real interest rates becomes increasingly futile.
https://youtu.be/d9qhofw8ZVc
The last decade has been a challenge for many investors, especially those investing for the long term and retirement. Given declines in global stock markets, many investors have seen little to no real growth in their portfolios over this period. This Wealth Guide explains why investors’ portfolios may underperform in both bear and bull markets and incur substantial costs in the process. It also details the impact this chronic underperformance can have on achieving long-term financial goals.
For more free wealth management guides on portfolio performance and for expert consultation, visit SolidRockWealth.com.
Developing an Asset Allocation Strategy and the Military Familymilfamln
This webinar discusses asset allocation, diversification and strategies to implement an individualized investment plan https://learn.extension.org/events/1715
Building and Maintaining a Private Market Portfolio: Inroduction to Private M...BrookePollack
CTC Consulting White Paper: Introduction to private market portfolio management and cash flow characteristcs of these investments for long-term private market investors.
Commodities managers may in fact benefit from a distinct advantage over their equity and fixed income peers – that is they seem to have a credible information advantage.
DSP World Mining Fund - An Open Ended Fund Of Funds Scheme investing in Mining Companies through International Funds
This Open-ended Fund of Funds Scheme is suitable for investors who are seeking*:
1. Long-term capital growth
2. Investment in units of overseas funds which invest primarily in equity and equity related securities of mining companies
3. High Risk**
*Investors should consult their financial advisors if in doubt about whether the Scheme is suitable for them.
**Risk may be represented as:
Low: Investors understand that their principal will be at low risk
Moderately Low: Investors understand that their principal will be at moderately low risk
Moderate: Investors understand that their principal will be at moderate risk
Moderately High: Investors understand that their principal will be at moderately high risk
High: Investors understand that their principal will be at high risk
A look at how we got into this mess of a financial meltdown, what to do in the midst of it, and how to capitalize going forward. This presentation illustrates the need of hiring a professional advisor to help you manage your emotions during times of uncertainty.
The Dynamic Implications of Sequence Risk on a Distribution Portfolio Journal...Better Financial Education
A practical method for advisers to measure exposure to sequence risk is through evaluation of the current probability of failure rate (which I've later renames as iteration failure rate to reflect measurement of the Monte Carlo simulation rather than the plan itself - two different things). This paper lead to a deeper investigation of failure rates thus leading to two subsequent papers discovering the three-dimensional nature of simulations over various time periods and allocations, as well as application of longevity to the simulation modeling.
Can You Pick The Next Winner?
Asset Class Performance 2002‐2021 of various global markets.
Pick any color in any earlier year and see what
happened in any later year. Bottom go up and top go down randomly.
*Note the 20 year results also
change asset class positions
over the years (don't predict
the future).
Annual stock market returns are unpredictable, but “up” years have occurred much more frequently than “down” years in the US. That may be reassuring to investors, especially if they find market downturns unsettling.
The US stock market posted positive returns in 75% of thecalendar years from 1926 through 2021.
• The market gained an annualized average of 10.2% during this period. Yet nearly two-thirds of yearly observations were at least 10 percentage points above or below the average.
• Another noteworthy trend: More than two-thirds of the down years were followed by up years. The most recent example: a 5.0% loss in 2018 followed by a 30.4% gain in 2019.
Prototype software example of aging model incorporating both portfolio and lo...Better Financial Education
This first appeared in blog post that describes the graphs in more details
https://blog.betterfinancialeducation.com/sustainable-retirement/what-are-the-three-paradigms-of-retirement-planning/
Prototype software example of aging model incorporating both portfolio and longevity percentile statistics along with consumer spending trend line of “Real People” (which is not based here on spending percentile statistics, but on research averages). Starting balance $500,000 with $36,000 Social Security. Two simple graphs by age answer many retiree questions about potential future spending and balances. Creates a whole different discussion. Also illustrates why age 95 is a poor reference for planning since it doesn’t plan or consider aging into future ages from the beginning of retirement.
Finding the parallels between flying a jet and helping people
develop financial plans may be difficult for the average person, but for Larry R. Frank Sr., the similarities between these two activities are crystal clear.
A question of equilibrium - can there be more buyers than sellers? Or more se...Better Financial Education
Have you ever wondered who is buying if so many people are selling?
The notion that sellers can outnumber buyers on
down days doesn’t make sense. What the newscasters should say, of course, is that prices adjusted lower because would-be buyers weren’t prepared to pay
the former price.
What happens in such a case is either the would-be sellers sit on their shares or prices quickly adjust to the point where supply and demand come into balance and transactions occur at a price that both buyers
and sellers find mutually beneficial. Economists refer
to this as equilibrium.
The Happiness Equation as it relates to investing is an interrelationship between your perceptions and expectations of investing and events. How do you manage happiness when you can't manage the markets?
A mistake many inexperienced sailors make is not having a plan at all. They embark without a clear sense of their destination. And once they do decide, they often find themselves lost at sea in the wrong boat
with inadequate provisions.
Destination, contingencies when trouble comes up, course corrections, bad weather and more can happen on the journey. How do you properly prepare for sailing is much the same as investing.
When setting expectations,
it’s helpful to see the range of outcomes experienced
by investors historically. For example, how often have
the stock market’s annual returns actually aligned with
its long-term average? Better yet, how often are the markets positive?
How many times can you use a source of money in your retirement plan? Turns out, just once, unless you know ahead of time WHEN something is going to happen, or if something was NOT going to happen. Since we don't know either, we need to plan on what resources may solve which issues we have in retirement. That plan should be documented in some fashion, otherwise our minds begin to allocate limited resources to everything - and that's when life happens.
This will be discussed in detail on Better Financial Education's blog on the 4th of Oct 2017 http://wp.me/p2Oizj-Jc .
The world is risky. The future is uncertain. And many of the decisions we make can have a pro-found impact on our future welfare. Risk cannot be eliminated, but it can be managed.
Blog post for further perspective http://wp.me/p2Oizj-I8 (scheduled to post 17 May 17).
Robo-advisor portfolios may be well diversified, they also contain construction gaps that should not be present in well-constructed portfolios.
Post discussing this in broader context schedule for 3 May 2017 http://wp.me/p2Oizj-HV
Robo-advisor portfolios may be well diversified, they also contain construction gaps that should not be present in well-constructed portfolios.
Post discussing this in broader context schedule for 3 May 2017 http://wp.me/p2Oizj-HV
This paper essentially demonstrates to academics and the profession that the current method of computing retirement income essentially arrives at a single solution applicable only to today; it does not model the future as currently interpreted. Our paper contrasts the difference between a calculation and a "multi-cast" simulation model.
Our research summary paper is published in the Journal of Financial Planning, Nov 2016. A link to the paper is available here "Combining Stochastic Simulations and Actuarial Withdrawals into One Model." ( http://bit.ly/2eLBUq9 )
Our working paper documenting our research project won the CFP® Board Best Research Paper Award at the 2016 Academy of Financial Services ( http://academyfinancial.org/ ) annual conference through an academic panel using a blind review process. "Certainty of Lifestyle: Contrasting a Simulation Over a Fixed Period versus Multiple Period Models" ( http://bit.ly/2dWtuNz )
In early Nov 2016, two blogs will post going into more insights from the research: Just where does the fear of outliving our money come from? Part I with link to Part II. ( http://wp.me/p2Oizj-H2 )
Investing makes it possible for many of us to achieve important lifetime goals, such as retirement. That’s why we employ an investment approach based on almost nine decades of data, analysis and research, insights from behavioral finance and close relationships with leading academics. There are four key concepts which play a vital role in the construction and management of our portfolios. Together, they add up to a distinctive long-term, approach we call Asset Class, or evidence-based, Investing
There are a number of different methods of calculating investment return, depending on what you’re trying to measure. Perhaps the most basic is total return, which is simply an investment’s ending balance expressed as a percent of its beginning balance. Total return includes capital appreciation and income components; it assumes all income distributions are reinvested. To annualize total return, you’ll need to calculate the compound annual return, which generally requires using a financial calculator. It’s important to keep in mind that you need a greater percentage gain after a losing year in order to break even on your investment.
More discussion of this when blog posts 22 Feb 2017 http://wp.me/p2Oizj-Hk
Most people look at the benefits they would receive today when making their decision about when to begin receiving their Social Security. They also underestimate how long they may live unless they already have medical issues that are known to reduce longevity.
These two impulses cause many couples to begin their benefits too early which has an adverse effect for survivor income. When one person dies, the lowest benefit “goes away” and the highest benefit “remains.”
The article below explains how that works with a couple and their Social Security benefits at various ages.
This brief slideshow discusses some elements necessary to recognize that our emotions and reactions to investing and markets often hurt results. Discipline and a focus on what you can control are important to success.
There is an investing approach that is based on discipline and evidence from research in both the finance and behavioral finance sciences.
Scheduled to post to Better Financial Education blog 11 Jan 2017 http://wp.me/p2Oizj-vH
Most people don’t know how their Social Security benefit is determined. Being unaware leads to this very common question – Will working longer increase, or decrease my Social Security benefit?
Working longer, even part time, will NOT reduce your benefit. And in some cases, may increase your benefit.
The blog post discussing this will appear 28 Dec 2016 http://wp.me/p2Oizj-GY
The Evolution of Non-Banking Financial Companies (NBFCs) in India: Challenges...beulahfernandes8
Role in Financial System
NBFCs are critical in bridging the financial inclusion gap.
They provide specialized financial services that cater to segments often neglected by traditional banks.
Economic Impact
NBFCs contribute significantly to India's GDP.
They support sectors like micro, small, and medium enterprises (MSMEs), housing finance, and personal loans.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Webinar Exploring DORA for Fintechs - Simont Braun
Portfolio perspectives-greatest lesson-part2-0813
1. Greatest Lessons of the Great Recession
August 2013
Portfolio
Perspectives
By Joni Clark, CFA, CFP®
Chief Investment Officer, Loring Ward
Last month we began a three-part series on the Greatest Lessons
of the Great Recession, and this month we continue. To read Part
One, click here.
Lesson Three
Active Managers Have Not Outperformed in
Bear Markets (or Bull Markets)
Every January, USAToday asks top investment strategists to offer
up their outlook for the year ahead, including where they think
the S&P 500 will end the year. Ahead of the calamitous market
declines and economic turmoil just around the corner, all of the
strategists’ forecasts at the beginning of 2008 were predicting an
up year in the markets.
Similarly, at the end of 2007, New York newspaper Newsday
sampled “eight major Wall Street Securities firms” and came out
with an average price target for the S&P 500 by the year-end
2008 of 1,653, representing a 12% rise on the previous year.1
We now know the S&P 500 Index declined by 37% for the year
2008.NoneofUSAToday’sorNewsday’sstrategistsevenpredicted
the down direction of the market correctly. Also unforeseen, the
bankruptcy or sale of many of these strategists’ own firms.
If experts can’t even predict recessions or the direction of the
markets, how can we expect active managers to successfully pick
individual stocks whose performance is so sensitive to economic
and market conditions?
Active managers attempt to outperform an index, such as the
S&P 500 Index, by actively trading individual stocks and/or
engaging in market timing — deciding when to be in and out
of the market. Many investors believe that active managers earn
their keep in bear markets, because they avoid losses by hand-
picking superior individual stocks or by shifting out of stocks
altogether before steep market declines occur.
Standard and Poor’s has been measuring the performance of
active managers against their index counterparts for several years
now. Their May 2009 Indices Versus Active Funds Study spe-
cifically focused on the bear market of 2008 and concluded that
“the belief that bear markets favor active management is a myth.”
In aggregate in 2008, actively managed funds underperformed
the S&P 500 Index by an average of 1.67%.2
Since 2008, these same studies continue to show that the major-
ity of active managers fail to beat their benchmarks. As you
can see from the chart below, from 2008 – 2012, the S&P 500
Index outperformed 78% of actively managed large cap mutual
funds, and the S&P Small Cap 600 Index outperformed 80% of
actively managed small cap funds.
PART TWO
1
2008 Outlook for Investors’, Newsday, (December 31, 2007)
2
Standard and Poor’s May 2009 Indices Versus Active Funds Study
2. Portfolio Perspectives
Percentage of Active Funds that Failed to Beat Their
Index (2008–2012)
U.S. Large
Cap
62%
U.S. Mid
Cap
80%
U.S. Small
Cap
73%
Global
63%
International
78%
Emerging
Markets
83%
Short-Term
Inv. Grade
Fixed Income
94%100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Stock Fund Category
%ofActiveFundsthatFailedto
OutperformBenchmark
Source: Standard & Poor’s IndicesVersus Active Funds Scorecard (SPIVA), year
end 2012. Index used for comparison: U.S. Large Cap – S&P 500 Index; U.S.
Mid Cap – S&P MidCap 400 Index; U.S. Small Cap – S&P SmallCap 600 Index;
Global Funds – S&P Global 1200 Index;International – S&P 700 Index;Emerging
Markets – S&P/IFCI Composite;Short-Term Inv.Grade Fixed Income – Barclays 1-3
Year Government/Credit Index. Outperformance is based upon equal weight
fund counts.For illustrative purposes only.Index returns do not include payment
of any sales charges or fees an investor would pay to purchase the securities
they represent. Such costs would lower performance. Past performance is not
an indication of future results.Standard & Poor’s®
,S&P®
,S&P 500®
,S&P MidCap
400®
,S&P SmallCap 600®
and SPIVA®
are registered trademarks of Standard &
Poor’s Financial Services LLC.
Active managers are further challenged by the fact that while
overall the stock market historically delivers positive returns over
the long run, it is actually a small group of stocks that is respon-
sible for that positive return.
As the following chart illustrates, of the total U.S. stock market
database from 1926 – 2012, only the top-performing 25% of
stocks were responsible for the market’s gain. The remaining
75% of the stocks collectively generated a loss of -0.6%. This
example demonstrates the difficulty in selecting the individual
stocks that will perform better — or even in-line with — the
broad stock market.
The Impact on Returns of Missing the Top-
Performing Stocks (1926 – 2012)
All U.S. Stocks Excluding the Top 25%
of Performers Each Year
9.6%
-0.7%
Source: Results based on the CRSP 1-10 Index. CRSP data provided by the
enter for Research in Security Prices, University of Chicago. Past performance
is not indicative of future results. Indexes are unmanaged baskets of securities
in which investors cannot directly invest.The data assume reinvestment of all
dividend and capital gain distributions; they do not include the effect of any
taxes, transaction costs or fees charged by an investment advisor or other
service provider to an individual account. The risks associated with stocks
potentially include increased volatility (up and down movement in the value
of your assets) and loss of principal. Small company stocks may be subject to a
higher degree of market risk than the securities of more established companies
because they tend to be more volatile and less liquid.
Attempting to enhance your returns by seeking out the needles
in the haystack introduces an additional layer of active risk and
the potential for increased volatility. A portfolio of even the most
carefully chosen stocks could easily wind up with none of the
best-performing stocks in the market — and thus could possibly
produce flat or negative returns for many years. As the historical
performance of active managers demonstrates, very few of them
are accomplished stock pickers.
Hedge funds, run by some of the smartest financial minds in the
world, have had an abysmal track record — and they invest in
almost anything in an attempt to make money in up and down
markets: stocks, commodities, derivatives, mortgage backed secu-
rities, timber forests, insurance contracts, etc. In 9 of the last 10
years, hedge funds (as measured by the HFRX index) were beaten
by the S&P 500.
If the best financial minds with maximum flexibility can’t beat the
market, what hope is there for the rest of us? Not surprisingly,
investors are increasingly pulling their money out of actively man-
aged investments. They are tired of paying high fees for invest-
ments that year after year just don’t perform very well.
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http://www.economist.com/news/finance-and-economics/21568741-hedge-funds-have-had-another-lousy-year-cap-disappointing-decade-going