Volatility Takes Its Toll on Long-Term Investing

    0
    345

    Average Annual Total Returns (as of 10-31-2011)


    YTD Returns
    at NAV

       

    1
    Year

    3
    Years

    5
    Years

    10
    Years

    15
    Years

     
      Standard & Poor’s 500 Composite Index

    N/A

    8.07%

    11.41%

    0.25%

    3.69%

    5.77%

     
      DJIA

    N/A

    10.34%

    11.80%

    2.53%

    5.39%

    7.04%

     
      NASDAQ

    N/A

    7.06%

    15.97%

    2.55%

    4.73%

    5.39%

     
      MSCI All Country World Index ex- USA

    N/A

    −4.25%

    13.43%

    0.08%

    8.05%

    5.39%

     
      Source:Bloomberg   

     

     

               

    This chart shows the price of long-term investing, greater volatility and how the luck-of-the-draw will play an increasingly important role in retirement planning.

    Comparing domestic and international indices, the chart shows that the average return over 15 years of all the indices was  5.89%, excluding fees.  The chart also shows the volatile returns for each index year, which could have a large impact on people who needed to cash out of the market.  For instance, NASDAQ  and MSCI Index investors were particularly hard hit during the past 15 years and assumed significant risks without much reward. 

    Going forward, many invetsment gurus expect increased market volatility as the financial services, banking, manufacturing and housing industries restructure. These recoveries will be hampered by timid consumer spending. 

    The point of this chart is to show investors that diversification outside of equity indexes may provide some buffer to erratic returns, but the volatility will remain. 

    The best advice is to take control over the few investment variables you can control: fund expenses, asset allocation, and working with funds and advisers that reveal their compensation, so you get actual objective advice; not recommendations tainted by revenue sharing.

    Given the volatility in these charts, you have to pick your advisers carefully.  Follow the rule: One strike and you are out. The reason: The money you lose in these markets will be difficult, or impossible, to recover as your grow older.  

    Note: Data at NAV as of Oct 31, 2011 (updated monthly)

     

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    Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).

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