It’s only natural for someone invested in a poorly performing active equity mutual fund to wonder if it’s time to make a change. Should an investor sell a fund if it trails its benchmark for a year? Three years? Five years?
Investment time horizon is a critical concept in building wealth. Most investors have very long investment time horizons, typically decades or more.
We are experiencing a new peak in the rhetoric around trade, geo-politics, the economy and the business cycle. We have also seen increased market volatility.
Planning is a powerful tool to help investors succeed and achieve better outcomes. The table below highlights the benefits of planning taken from a study on retirement planning among Americans over age 50.
“Now’s not a good time to invest,” or “I’m waiting for the right conditions” are familiar refrains we hear from investors and advisors alike. Fortunately for long-term investors who don’t take regular withdrawals from their portfolios, the sequence of returns doesn’t affect the ultimate investment outcome.
Investors, economists and the media spend an enormous amount of time and energy trying to forecast the economy. The idea is that forecasting economic growth will give us an idea of where the stock market is headed. Surprisingly, no predictive relationship exists between current economic conditions and the current stock market.
Rather surprisingly, the equity strategy framework can provide an estimate of current expected stock market returns. This is accomplished by measuring the recent investor response to each strategy, which, it turns out, captures the deep behavioral currents driving market returns. The resulting information is useful when managing equity market exposure.
With the recent market decline, increased volatility and the deafening media noise, it can be easy to lose track of the basics. Remember, recent activity doesn’t tell us much about market returns.
Examining investment strategy can be useful when evaluating mutual funds, but what information is contained in fund holdings? Do they reveal stock-picking skill?
The surging US economy and stock market have left international markets behind, with the S&P 500 Index beating the MSCI EAFE Index1 by 7.1% per year for 11 years. But US equities don’t always outperform the rest of the world, and the potential of international equity returns shouldn’t be overlooked.
Even though we all know market fluctuations are a normal part of equity investing, large market declines are scary to most investors because they often happen rapidly and feel random.