Remember The Lost Decade? It wasn’t that long ago that investing money in an S&P 500 index fund would have yielded a negative rate of return. Specifically, between January 2000 and December 2009 the S&P 500 had a total return of (9.1%), hence The Lost Decade label for that 10-year period.As financial advisors, we don’t think in 10-year increments. We don’t even think in 20-year increments. We think long term, big picture so what happens in any rolling 10-year period doesn’t shake or change our fundamental beliefs.We remind you of The Lost Decade because over the last few years, the S&P 500 has done well. Really well. And when that’s the primary index reported in the U.S. financial media, and you are repeatedly bombarded with its outperformance, it’s hard to ignore. So we’d like to go back to basics and remind you of a few key things:1. Different asset classes are in favor at different times and it’s impossible to predict when a specific asset class is going to do well, and when it’s not going to do well. So instead of trying to predict the future or chase performance, we believe the best course of action is to own a globally diversified portfolio that is appropriate for your risk profile.2. Over time, the S&P 500 (which represents only 500 U.S. large companies) has been one of the least productive equity asset classes: Research shows us that over time, small companies will outperform large and value companies will outperform growth. Now this doesn’t happen in every cycle (we’re clearly in a cycle where large companies are outperforming small), but just because we’re in a period where large companies are doing well, we aren’t going to change the fundamental structure of how we build and allocate portfolios.3. From January 1973 – September 2014, investing in an S&P 500 index fund would have given you an annualized rate of return of 10.29% versus 11.06% in a hypothetical 60/40 Balanced Strategy**. Total return over that same period was 5857.87% for the S&P 500 vs. 7884.89% in the Balanced Strategy portfolio.4. And remember – investing isn’t just about generating return, it’s about managing risk so let’s consider volatility in that same time frame. From January 1973 – September 2014 the S&P 500 had an annualized standard deviation of 15.47% while a hypothetical 60/40 Balanced Strategy had a standard deviation of 9.38%. If you do the math, being invested in a diversified portfolio gave you a greater return while taking on about 40% less risk!It’s easy to get caught up in the headlines, and it can be frustrating when your portfolio ends the year with a single digit rate of return versus double digit returns for U.S. markets. But remember that success as an investor isn’t about “beating the market” or avoiding losses or anything having to do with short term metrics. It’s about your ability to meet your long-term goals. And we will do what we can as your financial advisors – including reminding you of what drives our investment philosophy - to help you get there.
A veteran of the financial services industry with more than 18 years’ experience, Sarah is very clear about which aspect of her job she finds most rewarding: working with people.
“People have plans, goals, dreams,” she says. “I’m there not only to help my clients turn dreams into realities, but to educate them and help reduce the worry and uncertainties that naturally come with being an investor.”
Born and raised in New York City, she brought her talents to DHG Wealth Advisors in 2007. Sarah graduated cum laude from Duke University with a BA degree in Economics, and she holds an Accredited Investment Fiduciary® designation from Fiduciary360.