Performance Archives - Page 2 of 4 - NorthStar Capital Advisors

Happens All The Time

The New Year selloff in stocks has captured a lot of attention because,

We’re not used to this since the market has been unusually quiescent the past few years

The decline is global

The speed of descent is significant

But despite perception, double-digit declines from prior highs are the norm, not an anomaly. It happens two out of every three years.

Here are great points of reference to put this market event into context:

The average intra-year decline is 16.4%. This current decline might feels worse due to the speed at which it’s happening, and because it’s occurring right out of the gate.
Double digit declines are to be expected, 64% of all years experienced them.
It’s not unusual for those double digit declines to be of little importance. 57% of the years with 10% drawdowns finished positive.
Stated differently, 36% of all years saw a double digit decline and still finished positive.
Drawdowns of 20% or more have happened 23 times, or 26% of all years. On five of those 23 occasions, stocks still ended up positive on the year.

The following chart provides a great visual on how intra-year drawdowns are normal.

Source: TII

Asset Class Performance, 1H 2015

From the Novel Investor:
The chart below shows several issues investors struggle with all the time. It’s difficult to pick the best performing investment year after year, yet for many investors it’s an annual event. They look for an encore, picking the best asset class last year with the hope of a repeat performance. Yet, betting on last year’s winner rarely works out.

Assets at the top of the chart one year could be at the bottom the next, and vice versa. Much of this is due to reversion to the mean. But over the long-term, those big swings even out. The chart shows annual returns for eight asset classes against a diversified portfolio. Diversification works to smooth out those big swings in the short-term. While you’ll never get the biggest gains of any year, you avoid the huge losses.

The chart above ranks the best to worst investment returns by asset class over the past 15 years.

Source: Novel Investor

Best Illustration of Bull & Bear Markets

This is the best illustration we’ve ever seen of history’s bull and bear markets. Blue illustrates past bull markets’ durations and returns (total and annualized). Red illustrates the bear markets. This was published in May 2014 so the current bull market is actually pushing 69 months.

Some key takeaways:

There’s a lot more blue than red meaning stocks tend to spend more time going up in value than going down.
The current bull market might feel long but by historical standards, the length and strength of this bull is not exceptional

Source: BI

Stock Market’s Merry Performance Over Time

Above is Carter Braxton Worth’s seasonal interpretation of the stock market’s history. Stacking up the stock market’s annual performance going back nearly 200 years can look merry and bright.

Since 1825, the stock market has produced an annual gain 71% of the time, or 134 times, while losing ground just 55 times. A standard distribution chart, which happens to take the shape of a Christmas tree, shows how for most years, the market moves within a range of zero to up 10%.

Source: MarketWatch

Colleges That Produce The Best Investors (?)

A new study on which schools produce the best investors has U.Va. in the top spot, according to the Wall Street Journal.

SumZero – “a gated online community” for investment pros analyzed their user data reaching back to 2008. The University of Virginia produces better stock pickers on average than any of the Ivy Colleges.

And just in case you’re wondering, two-third of the personnel at NorthStar Capital Advisors are U.Va. graduates!

By the way — we consider these results as pure entertainment. Stock picking is only part of the big picture. Long-term success for most investors requires careful planning, diligent saving, and disciplined execution of your investing strategy.

Chasing Past Performance is Expensive

A new study demonstrates that chasing the hot mutual fund is an inferior investing strategy compared to good, old-fashioned buy and hold.

Vanguard analyzed a decade of data ending December 31, 2013 across nine asset classes. In every case the investor would have been significantly better off just sticking with the index. On average the indexes generated 50% higher returns than the performance-chasing strategy!

Buy and hold may not be perfect, but it can be a lot better than flitting from mutual fund to mutual fund.

75% of Americans get the Most Important Investing Question WRONG

Powerful observation from Vox.com regarding public perception versus reality when it comes to how to best invest your money:

Which of the following do you think is the best long-term investment?

Real Estate
Gold
Stocks/Mutual Funds
Savings Account

Don’t feel bad if you didn’t get the answer right. You’re in good company.

Recently, Gallup asked Americans what they thought their best investment bet was over the long run. 24 percent of Americans named stocks and mutual funds — but the same share named gold, and even more (30 percent) named real estate. The trend lines are actually positive, as in 2011 a baffling 34 percent of Americans named gold as their top pick:

There’s a right answer here — and it’s one that about two thirds of respondents who answered the question got wrong. If history is any guide, stocks are the best bet in the long run, and gold and real estate certainly are not.

Source: Vox.com

Annual Asset Class Returns

The table below ranks the best to worst investment returns by asset class over the past 15 years. CLICK IT FOR A CLOSER LOOK
Great chart from Novelinvestor:

The chart shows several issues investors struggle with all the time. It’s difficult to pick the best performing investment year after year, yet for many investors it’s an annual event. They look for an encore, picking the best asset class last year with the hope of a repeat performance. Yet, betting on last year’s winner rarely works out.

Assets at the top of the chart one year could be at the bottom the next, and vice versa. Much of this is due to reversion to the mean. But over the long-term, those big swings even out. The chart shows annual returns for eight asset classes against a diversified portfolio. Diversification works to smooth out those big swings in the short-term. While you’ll never get the biggest gains of any year, you avoid the huge losses.

Know More, Make More

A new academic study finds that more financially knowledgeable people earn a higher return on their 401(k) retirement savings.

Dr Robert Clark (NC State University), Dr. Annamaria Lusardi (George Washington University), and Dr. Olivia Mitchell (University of Pennsylvania) analyzed a unique dataset that combined 401(k) performance data for 20,000 employees plus financial literacy data for the same workers.

Investors deemed to be more financially knowledgeable than peers enjoyed an estimated 1.3% higher annual return in their 401(k)s or other defined contribution plans than those with less knowledge.

According to the study’s authors:
“We show that more financially knowledgeable employees are also significantly more likely to hold stocks in their 401(k) plan portfolios. They can also anticipate significantly higher expected excess returns, which over a 30-year working career could build a retirement fund 25% larger than that of their less-knowledgeable peers.”

Financially savvy people tend to save more and are more likely to invest those savings in the stock market. But past studies haven’t clearly demonstrated that these people necessarily make better investment decisions. The authors look at patterns in 401(k) retirement accounts and find that more sophisticated investors do indeed get better returns on their savings.

Source: “Financial Knowledge and 401(k) Investment Performance”

Elite Colleges Don’t Buy Happiness or Extra Money for Graduates

Attention high school seniors that were rejected by their first-choice college

A new Gallup survey of 30,000 college graduates of all ages in all 50 states has found that graduation from an elite college provides no discernible advantage over Podunk U.

“It matters very little where you go; it’s how you do it” that counts, said Brandon Busteed, executive director of Gallup Education.

Gallup’s data demonstrate that people that feel the happiest and most engaged are the most productive. Those successful people got to that point by developing meaningful connections with professors or mentors, and made significant investments in long-term academic projects and extracurricular activities.

This new study’s results are well aligned with the existing body of academic research. For example, economist Stacy Dale published an insightful paper in 2004 that found that students who were accepted to elite schools, but attended less selective schools, went on to earn just as much money as their elite counterparts.

“Individual traits matter more than where you went,” Ms. Dale said. “It’s a lot more important what you learn later in life than where you got your undergraduate degree.”

Source: WSJ

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