Fun Facts Newsletter | January 2015

Key lessons from 2014:

  1. "The stock market" is not just the Dow Jones Industrial Average or the Standard & Poor's 500 Index. In fact, the S&P 500 is about 33% of the world stock market.
  2. The world stock market was only up 3.8% in 2014.
  3. There was a HUGE difference of 18.75% between U.S. large companies and foreign large companies: U.S. up about 13.25% and foreign down about 5.25%. Since 1999 the difference has usually been +/- 8% or less.
  4. U.S. large companies have outperformed foreign large companies since 2010 by an annualized return of about 9%. Investors may forget that large foreign companies provided the same outperformance in reverse from 2002-2007.
  5. U.S. large companies beat U.S. micro cap and small value stocks by over 10%.
  6. Value style stocks across all sizes in the U.S. and international  markets under-performed broader stock market indices; historically value outperforms.
  7. Bond returns were surprisingly higher than expected with returns in the 5% to 6% range for intermediate term bonds, with tax-free municipal bonds doing even better. Short term bonds were a modest 1%+ return, as expected.
  8. Conservative, low volatility strategies designed to cushion stock market volatility and combat low interest rates ended the year with returns in the 1% range.

Key lessons for 2015 and beyond:

  1. Risk and return are related (the 3 R's).
  2. Successful investing is a contrarian process.  Sell high, buy low and be willing to do what your gut tells you not to do. Don't follow the crowd.
  3. Successful investing requires a tolerance for volatility and a long-term focus.
  4. Forecasting is a futile exercise.  Our crystal ball is no clearer than yours, therefore, we offer no forecast for 2015 and beyond.
  5. A strategic asset allocation in a broadly diversified, multi-asset portfolio emphasizing passively managed funds is a sound investment strategy.

As always, please contact us with any questions or news or comments.

Happy New Year!

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