8 main lessons for the 80-year history of the market
MarketWatch columnist
Paul Merriman in his article
It discusses what lessons need
drawn from the entire history of the market. offer
join his reasoning and
I represent an adapted translation
material.
What do you think, what
the most important knowledge should be at
investor?
Keep your expenses
at a low level? Supermenedzher hire?
To avoid paying taxes? catch the perfect
moment? These are all significant, but perhaps
the most important decision - is the choice of assets,
in which you invest. selection
asset class - a fancy name
for advice, of course.
In fact, to postpone
some money to invest then
these funds in the first place - is,
perhaps the most important step. And if you
do not do this, then you are not even an investor.
In the stock market you
You can invest in popular
growth stocks or shares at a low
value. You can invest in large
companies (large-cap) or
smaller companies (small caps).
You can invest in the US
stocks or international. Possible and
themselves developing equity markets to invest
funds and even funds
property.
According to experts,
more than 90% of your final yield from
investment depends on the choice of the class
assets. (This assumes that you have invested
money and leave them there. when you move
them from one of your other assets
the results are completely unpredictable).
There are some
the study of how the most popular
four American asset class
equity behaved for
recent decades. Many people
think, S P 500 index represents
"market"But it is not. In fact,
actually, for a long time
each of the other of his "colleagues" Indices
surpassed this figure is much,
and more than once. The author assures us,
that he might make a table with
an interval of one year, but for us also,
readers prefer more informative.
One of the reasons why he chose the period
10 years old, is an aphorism of Warren Buffett: Do not
something must buy if you are not sure,
that within ten years, this
asset does not leave the market.
Here are some of the findings,
that the author did after comparing
assets - the index S P 500, U.S. Large Cap Value,
U.S. Small Cap and U.S. Small Cap Value. "Whenever
study table of investment returns,
I draw important lessons that help
understand the market and it does not surprise me their
behavior ", - says the author.
| S P 500 index | -0.1 | 9.2 | 19.4 | 7.8 | 5.9 | 17.5 | 18.2 | -0.9 | 9.7 |
| Large-Cap Value | -5.7 | 12.7 | 18.4 | 9.4 | 12.9 | 20.6 | 16.8 | 4.1 | 11.2 |
| Small-Cap | 2.3 | 14.9 | 19.2 | 13.0 | 9.2 | 16.8 | 15.5 | 9.0 | 12.7 |
| Small-Cap Value | -2.6 | 19.8 | 19.6 | 14.4 | 14.4 | 20.1 | 16.2 | 12.8 | 14.4 |
Here are eight things that
It can be understood from this table:
1. It is obvious that, when
compare indicators in increments of 10 years,
the market has grown most of the time. Of
The table shows that 28 of the 32 indicators
positive, and only four -
negative. By the way, three of them
occurred back in the 1930s.
2. The market can be very
successful consecutive decades. Most
investors recall that in the 1990s were
very high returns for stocks, but this
table shows an even higher
profit in 1980.
3. Leading and lagging
asset class is sometimes reversed.
This makes it difficult to select just one,
with whom you can be sure that he
It will always be on top. In the 1960s,
companies with small capitalization and
cheap stocks behave better. They
We did the same from 2000 to 2009. But,
in 1970 were ahead of all assets
large-cap and penny stocks.
In the 1950s, 1980s and 1990s, each class
assets in this table received double-digit
revenues, and 1940 have been extremely close.
4. The most consistent
The winners were stocks with low
capitalization and value. For 1930
s still got this asset class
Ten years ago the profit, which is always
It was more than 12.5%.
5. Only one
decade - 30 years - almost all
Group received profit. And if you
the math indicator for inflation,
it turns out that the return of this group
I was actually positive: up
1.4%.
6. The first 10 years of this
century was viewed as "lost"
decade for stock investors,
mainly due to the growth of expensive stocks and
pair serious bear markets. In that
decade of the portfolio, which was
is divided equally among the four
asset classes, earned a profit
about 6.7%.
7. Over the past 80 years
"market beating" It was very easy,
if you think S P 500 index.
8. Saying that investors
get paid to take risks seems to be working
very good. Stocks of expensive assets
They are riskier than S P
500, and they are paid more. Growth shares
small caps are more
risky than stocks with high
capitalization, and they will also receive
more. Shares of small-cap -
the riskiest among these classes
assets, and investors have received the most
higher yield.
thanks to the third
lesson, it is impossible to understand what classes
assets will work best for
next week, next month,
in the next year or even next
decade. But there is a magic that
You can combine all four of them
in one portfolio. In 84 years - from 1930 to 2013
year - this group of four assets
increase the annual income from 9.7% to 12%.
If you think
it's a bit, here's a math: $ 1,000
Investments in 1930 (equivalent to
$ 14,084 in today's dollars) would have increased
to $ 2.4 million (unless assume 9.7%) or $ 13.6 million
(At 12%).
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