There’s more to life than the S&P 500

“Why do I own anything other than the S&P 500?” is the question being asked of thousands of financial advisors across the land, going on two or three years now. With every passing quarter, diversifying away from large cap US stocks seems to make less and less sense to the lay person, who basically judges his or her portfolio against it no matter what.

The best an advisor can do is to remind clients that so long as their portfolio is accomplishing the goals as set out by their individualized financial plan, this is not particularly relevant. The second best they can do is to point out that it isn’t always the case that US large cap stocks trounce every other asset class on the planet for three years running.

A few reminders…

First of all, long-term treasury bonds, which everyone hated last January, actually gave you almost double the return of the S&P 500 last year. regardless of whether or not this “should have” happened, it did. You’ll find examples of this kind of inexplicable thing taking place during just about every year, regardless of the consensus narrative at the time. What makes more sense, guessing or preparing in advance for it?

Bonds Continue to Outperform Stocks (All Star Charts)

Second of all, there are plenty of long-term time frames during which bonds, foreign stocks and REITs beat the US stock market. Ben Carlson has the most updated data set I’ve seen on the average annual returns for these asset classes going back 15 and 20 years.

What Are Long-Term Stock Market Returns Telling Investors? (A Wealth Of Common Sense)

Third of all, as Michael Batnick explains, there will be lost decades for US stocks in the future, just as there have been in the past. But a lost decade for the S&P 500 doesn’t have to mean a lost decade for a portfolio, provided one can have the courage and the patience to hold other assets amidst a runaway bull market. The thing is, many people don’t and cannot deal with the idea that there is a bull market happening that they aren’t collecting the full benefit of.

What Lost Decade? (The Irrelevant Investor)

Fourth of all – and this is an important reminder from James Osbourne of Bason Asset Management – you have no way of reasonably predicting when one asset class will cease to dominate while another takes the lead. There is no pattern to be discerned from the annual return scoreboard.

MEAN REVERSION & ASSET ALLOCATION (Basson)

The facts are the facts. The question for advisors is whether or not they are able to convey them effectively in the heat of the moment, when performance envy is everywhere and caution has taken a back seat to greed. Easier said than done, like most things worth doing.

 

What's been said:

Discussions found on the web
  1. Power to Choose rates commented on Oct 19

    … [Trackback]

    […] Here you will find 98469 additional Info on that Topic: thereformedbroker.com/2015/01/20/theres-more-to-life-than-the-sp-500/ […]

  2. sigma vape shop commented on Oct 30

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2015/01/20/theres-more-to-life-than-the-sp-500/ […]

  3. Harold Jahn Utah commented on Nov 04

    … [Trackback]

    […] Find More on to that Topic: thereformedbroker.com/2015/01/20/theres-more-to-life-than-the-sp-500/ […]

  4. agile DevOps commented on Nov 27

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2015/01/20/theres-more-to-life-than-the-sp-500/ […]

  5. replica Bmw Watches commented on Dec 08

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2015/01/20/theres-more-to-life-than-the-sp-500/ […]

  6. td banking login commented on Dec 20

    … [Trackback]

    […] There you can find 68576 additional Info on that Topic: thereformedbroker.com/2015/01/20/theres-more-to-life-than-the-sp-500/ […]

  7. regression testing commented on Dec 21

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2015/01/20/theres-more-to-life-than-the-sp-500/ […]

  8. Red Bull Wholesalers From Hungary commented on Dec 22

    … [Trackback]

    […] Read More here to that Topic: thereformedbroker.com/2015/01/20/theres-more-to-life-than-the-sp-500/ […]

  9. scotiabank sign in commented on Jan 17

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2015/01/20/theres-more-to-life-than-the-sp-500/ […]

Read this next.