As an investor having a good understanding of the principles of investing can help one achieve their financial goals. This presentation will look at the principles of compounding, rebalancing, market timing, risk reduction, and inflation.
A rising dollar, falling crude prices and low inflation all favor a down-trend for gold, while falling long-term interest rates are the only alleviating factor at present.
Temasek Review 2015- Embracing the Future (Media Conference Presentation)Temasek
The 12th edition of the Temasek Review, “Embracing the Future”, was launched on 7 July 2015.
Visit www.temasekreview.com.sg for the latest Temasek Review.
Follow @Temasek on Twitter at www.twitter.com/Temasek , on Facebook at https://www.facebook.com/temasekholdings and Instagram (@temasekseen) at https://instagram.com/temasekseen
Oil & Money 2015
Chair: Jan Prins - Independent Consultant Infrastructure and Energy Finance
Panel: Ian Catterall - Head, Natural Resources for EMEA Bank of Tokyo-Mitsubishi UFJ
Julian Mylchreest - Global Head, Energy & Power Bank of America Merrill Lynch
Mike Powell - Managing Director, Investment Banking Barclays
David Staples - Managing Director, EMEA Corporate Finance Moody’s Investors Service
Solarwarm is a Seychells company that was established in early 2013, mainly focused on the development of five areas i.e. plantation, aquaculture, mining, real estate and finance industries. Solarwarm was founded by Mr Ng Chin Chin, who was born on 1970 in Malaysia.
Temasek Review 2014- Our journey has just begun (media conference presentation)Temasek
The 11th edition of the Temasek Review, “Our journey has just begun”, was launched on 8 July 2014 and marks the 40th year since the company was first founded in 1974.
Structure
- The Temasek Charter
- Ten-Year Performance Overview
- Portfolio Highlights
- From Our Chairman
- Investor
- Institution
- Steward
- Group Financial Summary
- Major Investments
- Contact Information
- Temasek Portfolio at Inception
Visit www.temasekreview.com.sg for the latest Temasek Review.
Follow @Temasek on Twitter at www.twitter.com/Temasek.
-Create a diverse portfolio with passive method and trading on Watchmarket.com
-Design a trading strategy (including security selection), implement the strategy (execute the trades), and evaluate the performance of the portfolio.
-Write a final report and presentation to explain about the fund performance to investors.
Securities that are purchased in order to be held for investment. This is in contrast to securities that are purchased by a broker-dealer or other intermediary for resale. Banks often purchase marketable securities to hold in their portfolios.
A rising dollar, falling crude prices and low inflation all favor a down-trend for gold, while falling long-term interest rates are the only alleviating factor at present.
Temasek Review 2015- Embracing the Future (Media Conference Presentation)Temasek
The 12th edition of the Temasek Review, “Embracing the Future”, was launched on 7 July 2015.
Visit www.temasekreview.com.sg for the latest Temasek Review.
Follow @Temasek on Twitter at www.twitter.com/Temasek , on Facebook at https://www.facebook.com/temasekholdings and Instagram (@temasekseen) at https://instagram.com/temasekseen
Oil & Money 2015
Chair: Jan Prins - Independent Consultant Infrastructure and Energy Finance
Panel: Ian Catterall - Head, Natural Resources for EMEA Bank of Tokyo-Mitsubishi UFJ
Julian Mylchreest - Global Head, Energy & Power Bank of America Merrill Lynch
Mike Powell - Managing Director, Investment Banking Barclays
David Staples - Managing Director, EMEA Corporate Finance Moody’s Investors Service
Solarwarm is a Seychells company that was established in early 2013, mainly focused on the development of five areas i.e. plantation, aquaculture, mining, real estate and finance industries. Solarwarm was founded by Mr Ng Chin Chin, who was born on 1970 in Malaysia.
Temasek Review 2014- Our journey has just begun (media conference presentation)Temasek
The 11th edition of the Temasek Review, “Our journey has just begun”, was launched on 8 July 2014 and marks the 40th year since the company was first founded in 1974.
Structure
- The Temasek Charter
- Ten-Year Performance Overview
- Portfolio Highlights
- From Our Chairman
- Investor
- Institution
- Steward
- Group Financial Summary
- Major Investments
- Contact Information
- Temasek Portfolio at Inception
Visit www.temasekreview.com.sg for the latest Temasek Review.
Follow @Temasek on Twitter at www.twitter.com/Temasek.
-Create a diverse portfolio with passive method and trading on Watchmarket.com
-Design a trading strategy (including security selection), implement the strategy (execute the trades), and evaluate the performance of the portfolio.
-Write a final report and presentation to explain about the fund performance to investors.
Securities that are purchased in order to be held for investment. This is in contrast to securities that are purchased by a broker-dealer or other intermediary for resale. Banks often purchase marketable securities to hold in their portfolios.
Every day I hear from people that the stock market is a bad investment because of the volatile nature. Yes the stock market is volatile but over the long term we can see the true nature of investing in stocks and bonds.
How Does CRISIL Evaluate Lenders in India for Credit RatingsShaheen Kumar
CRISIL evaluates lenders in India by analyzing financial performance, loan portfolio quality, risk management practices, capital adequacy, market position, and adherence to regulatory requirements. This comprehensive assessment ensures a thorough evaluation of creditworthiness and financial strength. Each criterion is meticulously examined to provide credible and reliable ratings.
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.
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.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
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.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
Yes of course, you can easily start mining pi network coin today and sell to legit pi vendors in the United States.
Here the telegram contact of my personal vendor.
@Pi_vendor_247
#pi network #pi coins #legit #passive income
#US
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
Power of Reinvesting 1993–2012 The key to enhancing returns is the reinvestment of income. Returns decline dramatically if dividends or coupon payments are consumed rather than reinvested. The image compares the difference in hypothetical growth of $1,000 invested in stocks and bonds with and without reinvestment of dividends or coupon payments. Reinvesting your income enables you to take advantage of compounding. With compounding, you earn income on the principal in addition to the reinvested dividends and coupon payments. Growth of a hypothetical $1,000 investment in stocks: Ending value Compound annual return with reinvestment: $4,852 8.2% without reinvestment: $3,273 6.1% Growth of a hypothetical $1,000 investment in bonds: Ending value Compound annual return with reinvestment: $5,193 8.6% without reinvestment: $1,818 3.0% If you are an investor who does not need to spend dividends or coupon payments, you should consider reinvesting this income in order to maximize the growth of your portfolio. Keep in mind that total return represents capital appreciation, income, and reinvestment of income, and that capital appreciation is the return due only to changes in price. Government bonds are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than bonds. About the data Stocks are represented by the Standard & Poor’s 500 ® index, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Bonds are represented by the 20-year U.S. government bond. An investment cannot be made directly in an index.
Power of Compounding It’s easy to procrastinate when it comes to initiating a long-term investment plan. However, the sooner you begin, the more likely it is that the plan will succeed. This image illustrates the effects of compounding over time. Investor A began investing in stocks at the beginning of 1993, investing $2,000 each year for 10 years. After 10 years, Investor A stopped contributing to the portfolio but allowed it to grow for the next 10 years. The $20,000 outlay grew to $53,840 by year-end 2012. Investor B postponed investing for 10 years. At the beginning of 2003, Investor B began investing $2,000 each year in stocks for 10 years. The $20,000 outlay of Investor B (same as the one of Investor A) only grew to $27,820 by year-end 2012. By starting early, and thereby taking advantage of compounding, Investor A accumulated $26,021 more than Investor B, while investing exactly the same amount. Returns and principal invested in stocks are not guaranteed. The data assumes reinvestment of income and does not account for taxes or transaction costs. About the data Stocks are represented by the Standard & Poor’s 500 ® index, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. An investment cannot be made directly in an index.
Importance of Rebalancing 1992–2012 Because asset classes grow at different rates of return, it is necessary to periodically rebalance a portfolio to maintain a target asset mix. This image illustrates the effect of different growth rates on a static (unbalanced) portfolio over a 20-year period. At year-end 1992, the target asset mix began with a 50% allocation to stocks and a 50% allocation to bonds. The proportion of stocks in the portfolio grew from 1992 to 1997, when it accounted for 64% of the portfolio. Subsequent market fluctuations caused the stock allocation to drop to 57% by 2002, rise again to 69% in 2007, and drop again to 67% in 2012. This allocation is drastically different from the 50%/50% portfolio the investor started out with. Asset classes associated with high degrees of risk tend to have higher rates of return than less volatile asset classes. For this reason, a portfolio that is not rebalanced periodically may become more volatile (riskier) over time. Government bonds are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than bonds. About the data Small stocks are represented by the Ibbotson ® Small Company Stock Index. Large stocks are represented by the Standard & Poor’s 500 ® index, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Intermediate-term government bonds are represented by the five-year U.S. government bond. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs.
Managing Risk With Portfolio Rebalancing Over time, an investor’s portfolio asset-allocation policy can get disturbed by market ups and downs. For example, stocks tend to outperform bonds in the long run. Since stocks are riskier than bonds, greater allocation in stocks can also increase portfolio risk. Rebalancing is an essential account management tool that helps keep the portfolio within the risk tolerance level that is comfortable for the investor’s asset-allocation strategy. The image compares the risk and return of portfolios that are rebalanced to those that are not rebalanced over three different time periods. Risk and return are measured by annualized standard deviation and compound annual return, respectively. Standard deviation measures the fluctuation of returns around the arithmetic average return of the investment. The higher the standard deviation, the greater the variability (and thus risk) of the investment returns. In all three time periods, the rebalanced portfolio had a lower risk than the non-rebalanced portfolio. For instance, the rebalanced portfolio beginning January 1980 had a risk of 10.4%, which is only 74.8% of the 13.8% risk of the non-rebalanced portfolio. In addition to reducing portfolio risk, rebalancing may also be able to increase portfolio return. For example, the rebalanced portfolio beginning January 1970 had a return of 9.9%, which is higher than the 9.8% return of the non-rebalanced portfolio. Government bonds and Treasury bills are guaranteed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than bonds. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, and differences in accounting and financial standards. About the data Each portfolio consists of 60% stocks, 30% bonds, and 10% cash at the portfolio begin date. The 60% stock allocation consists of 30% large, 15% small, and 15% international stocks at each portfolio begin date. The bond allocation consists entirely of five-year U.S. government bonds, while the cash allocation consists of 30-day U.S. Treasury bills. The rebalanced portfolio has been rebalanced annually. Large stocks in this example are represented by the Standard & Poor’s 500 ® index, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Small stocks are represented by the Ibbotson ® Small Company Stock Index, international stocks by the Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE ® ) Index, government bonds by the five-year U.S. government bond, and cash by the 30-day U.S. Treasury bill. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs.
Dangers of Market Timing 1926–2012 Investors who attempt to time the market run the risk of missing periods of exceptional returns. This practice may have a negative effect on a sound investment strategy. This image illustrates the risk of attempting to time the stock market over the past 87 years. A hypothetical $1 investment in stocks invested at the beginning of 1926 grew to $3,533 by year-end 2012. However, that same $1 investment would have only grown to $20.34 had it missed the best 40 months of stock returns. One dollar invested in Treasury bills over the 87-year period resulted in an ending wealth value of $20.57. An unsuccessful market timer, missing the 40 best months of stock returns, would have received a return lower than that of Treasury bills. Although successful market timing may improve portfolio performance, it is very difficult to time the market consistently. In addition, unsuccessful market timing can lead to a significant opportunity loss. Returns and principal invested in stocks are not guaranteed. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest. About the data Stocks are represented by the Standard & Poor’s 90 index from 1926 through February 1957 and the S&P 500 ® index thereafter, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Treasury bills are represented by the 30-day U.S. Treasury bill. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs.
Dangers of Market Timing 1993–2012 Investors who attempt to time the market run the risk of missing periods of exceptional returns. This practice may have a negative effect on a sound investment strategy. This image illustrates the risk of attempting to time the stock market over the past 20 years. A hypothetical $1 investment in stocks invested at the beginning of 1993 grew to $4.85 by year-end 2012. However, that same $1 investment would have only grown to $1.79 had it missed the 12 best months of stock returns. One dollar invested in Treasury bills over the 20-year period resulted in an ending wealth value of $1.81. An unsuccessful market timer, missing the 12 best months of stock returns, would have received a return lower than that of Treasury bills. Although successful market timing may improve portfolio performance, it is very difficult to time the market consistently. In addition, unsuccessful market timing can lead to a significant opportunity loss. Returns and principal invested in stocks are not guaranteed. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest. About the data Stocks are represented by the Standard & Poor’s 500 ® index, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Treasury bills are represented by the 30-day U.S. Treasury bill. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs.
Market-Timing Risk Investors who attempt to time the market run the risk of missing periods of exceptional returns. This practice may have a negative effect on a sound investment strategy. This image illustrates the risk of attempting to time the stock market by showing the effects of missing the one best month on an annual return. Missing the one best month during a year drastically reduced returns. During years when returns were already negative, the effect of missing the best month only exaggerated the loss for the year. In six of the 43 years shown, 1970, 1978, 1984, 1987, 1994, and 2011, otherwise positive returns would have been dragged into negative territory by missing the best month. Although successful market timing may improve portfolio performance, it is very difficult to time the market consistently. In addition, unsuccessful market timing can lead to a significant opportunity loss. Returns and principal invested in stocks are not guaranteed. About the data Stocks are represented by the Standard & Poor’s 500 ® , which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs.
The Cost of Market Timing Investors who attempt to time the market run the risk of missing periods of exceptional returns, leading to significant adverse effects on the ending value of a portfolio. This top graph illustrates the risk of attempting to time the stock market over the past 20 years by showing the returns investors would have achieved if they had missed some of the best days in the market. The bottom graph illustrates the daily returns for all 5,040 trading days. Investors who stayed in the market for all 5,040 trading days achieved a compound annual return of 8.2%. However, that same investment would have returned 4.5% had it missed only the 10 best days of stock returns. Further, missing the 50 best days would have produced a loss of 3.7%. Although the market has exhibited tremendous volatility on a daily basis, over the long term, stock investors who stayed the course have been rewarded accordingly. The appeal of market timing is obvious—improving portfolio returns by avoiding periods of poor performance. However, timing the market consistently is extremely difficult. And unsuccessful market timing, the more likely result, can lead to a significant opportunity loss. Returns and principal invested in stocks are not guaranteed. Holding a portfolio of securities for the long-term does not ensure a profitable outcome and investing in securities always involves risk of loss. About the data Stocks in this example are represented by the Standard & Poor’s 500 ® , which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs.
Reduction of Risk Over Time One of the main factors you should consider when investing is the amount of risk, or volatility, you are prepared to assume. However, recognize that the range of returns appears less volatile with longer holding periods. Over the long term, periods of high returns tend to offset periods of low returns. With the passage of time, these offsetting periods result in the dispersion of returns gravitating or converging toward the average. In other words, while returns may fluctuate widely from year to year, holding the asset for longer periods of time results in apparent decreased volatility. This graph illustrates the range of compound annual returns for stocks, bonds, and cash over one-, five-, and 20-year holding periods. On an annual basis since 1926, the returns of large-company stocks have ranged from a high of 54% to a low of –43%. For longer holding periods of five or 20 years, however, the picture changes. The average returns range from 29% to –12% over five-year periods, and between 18% and 3% over 20-year periods. During the worst 20-year holding period for stocks since 1926, stocks still posted a positive 20-year compound annual return. However, keep in mind that holding stocks for the long term does not ensure a profitable outcome and that investing in stocks always involves risk, including the possibility of losing the entire investment. Although stockholders can expect more short-term volatility, the risk of holding stocks appears to lessen with time. Government bonds and Treasury bills are guaranteed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. Furthermore, small-company stocks are more volatile than large-company stocks and are subject to significant price fluctuations, business risks, and are thinly traded. About the data Small stocks are represented by the Ibbotson ® Small Company Stock Index. Large stocks are represented by the Standard & Poor’s 90 index from 1926 through February 1957 and the S&P 500 ® index thereafter, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Government bonds are represented by the 20-year U.S. government bond, and Treasury bills by the 30-day U.S. Treasury bill. An investment cannot be made directly in an index. The data assumes reinvestment of all income and does not account for taxes or transaction costs.
Returns Before and After Inflation Comparing the returns of different asset classes both before and after inflation is helpful in understanding why it is so important to consider inflation when making long-term investment decisions. This image illustrates the compound annual returns of three asset classes before and after considering the effects of inflation. Over the past 87 years, inflation has dramatically reduced the returns of stocks, bonds, and cash. The first bars for each asset class represent the nominal, or unadjusted, returns of each asset class. Nominal returns do not consider inflation. It is often the rate of return that you might think of when discussing the return on investment. The second bars illustrate the real, or inflation-adjusted, returns of each asset class. Real returns reflect purchasing power. For example, if you invested in cash equivalents in 1926, the money you earned over the period would provide you with very little purchasing power today. Notice that cash and bonds, after adjusting for inflation, barely kept pace with the rise in prices over the past 87 years. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. About the data Stocks are represented by the Standard & Poor’s 90 index from 1926 through February 1957 and the S&P 500 ® index thereafter, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Bonds are represented by the 20-year U.S. government bond, cash by the U.S. 30-day Treasury bill, and inflation by the Consumer Price Index. An investment cannot be made directly in an index.
Can You Stay on Track? It’s easy to follow a long-term strategy during good times; the hard part is sticking with it through the bad times. What should you do if you are a long-term investor sitting in the midst of a bear market? If you are holding a well-diversified portfolio, the answer is simple—continue to stay the course. This image illustrates the hypothetical growth of stocks, bonds, and an equally diversified portfolio over short- and long-term time periods. The graph on the left illustrates the performance of the assets during one of the worst three-year time periods in recent history. As illustrated, the significance of holding a diversified portfolio is most apparent in a bear market. Although the diversified portfolio still lost more than bonds in the short run, it did not withstand as great a loss as stocks. Over the long term, however, the picture changes. The graph on the right illustrates the performance of the assets over the long run: year-beginning 1975 to year-end 2012. By continuing to hold the all-stock portfolio past 1975 (over the full time period), one would have experienced the highest ending wealth value of the assets shown. However, it is important to understand that this greater wealth was achieved with considerable volatility, which is indicated in the short-term period (the left chart). While the more volatile single asset is likely to outperform the less volatile diversified portfolio over the long run, the main point to understand is that by maintaining a well-diversified portfolio, you are managing risk, not trying to escape it. Keep in mind that diversification does not eliminate the risk of experiencing investment losses. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than bonds. About the data Stocks are represented by the Standard & Poor’s 500 ® index, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Bonds are represented by the 20-year U.S. government bond. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs.