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Why A Fully Invested Strategy Makes Sense
We wrote in previous newsletters about the uncertainty and volatility of market recovery years. Let's reprise that data to help us understand what may be happening now. While we can't be sure that 2003 is a recovery year, the first half has given good indication that it may be.
Here are the first half results for eight recovery years in the past century as compared to 2003. The numbers shown are percentage returns for the S&P 500 Index. *
 |
1933 |
1942 |
1954 |
1963 |
1971 |
1975 |
1988 |
1991 |
2003 |
| Jan |
0.87 |
1.61 |
5.36 |
5.06 |
4.19 |
12.51 |
4.27 |
4.42 |
-2.61 |
| Feb |
-17.72 |
-1.59 |
1.11 |
-2.39 |
1.41 |
6.74 |
4.70 |
7.16 |
-1.5 |
| Mar |
3.53 |
-6.52 |
3.25 |
3.70 |
3.82 |
2.37 |
-3.02 |
2.38 |
0.96 |
| Apr |
42.56 |
-3.99 |
5.16 |
5.00 |
3.77 |
4.93 |
1.08 |
0.28 |
8.23 |
| May |
16.83 |
7.96 |
4.18 |
1.93 |
-3.67 |
5.09 |
0.78 |
4.28 |
5.26 |
| Jun |
13.38 |
2.21 |
0.31 |
-1.88 |
0.21 |
4.62 |
4.64 |
-4.57 |
1.13 |
| At mid-year |
59.45 |
-0.32 |
19.37 |
11.42 |
9.73 |
36.26 |
12.45 |
13.95 |
11.47 |
Now, let's view the year-end numbers.
|
| |
1933 |
1942 |
1954 |
1963 |
1971 |
1975 |
1988 |
1991 |
2003 |
| Year-end |
53.99 |
20.34 |
52.62 |
22.80 |
14.31 |
37.20 |
16.81 |
30.55 |
? |
Conclusions that we may reach:
- Recoveries are, by definition, fragile and volatile.
- We cannot time markets.
- Staying fully invested offers the return potential that markets have historically provided over time.
- The correct perspective for a portfolio is not month-by-month, but over a normal business cycle. That is usually expressed as a 3- to 5-year time horizon.
- * The S&P 500 is an unmanaged index and indicates reinvested dividends. One cannot invest directly in an index. Individual returns may, and should, vary from that index. A properly asset allocated portfolio includes all appropriate market sectors. However, the potential lessening of volatility through asset allocation does not negate, but underscores the importance of having a proper time horizon for an investment portfolio. Past performance is no guarantee of future results.
- While the outcome for the year 2003 won't be fully known until December 31st, it sure feels nice to be tracking what appears to be the right side of the curve.
Watch for our September E-newsletter that will publicize our upcoming University of Pittsburgh adult financial education courses. They are being updated for the coming school year with the most timely information and contain the timeless, textbook principles of investment portfolio management. Successful investing is not an accident. It results from proper methods consistently applied.
This article is for informational purposes
only and not intended as financial advice. Consult your financial
advisor to determine what is appropriate for your situation.
Past performance is no guarantee of future results.
If you have any comments, questions or suggestions concerning this
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