The S&P 500 Doubled: Did You Miss It?
Simple indexing strategies benefited from the S&P 500’s rapid run-up
Two years ago, a lot of articles, blogs, and opinions questioned the logic of buy-and-hold investing. Regardless of recent financial history, I still believe that the foundation of any good investment strategy is a globally diversified portfolio. I also believe that any good investment strategy is born from a complete and comprehensive financial planning analysis.
That should not shock anyone. Given the recent financial crisis and the ensuing rebound in equity markets, those who maintained a diversified portfolio have been well rewarded over the past 700 days.
Wait, 700 days?
Yes, 700 days. It has been 717 days exactly since the S&P 500 Index’s intraday market low in March of 2009. In those 700 some days the S&P 500 has almost doubled. (I wrote more about the recent market performance in a separate post.)
In other terms, 717 days equals one year, 11 months and 15 days. Alternatively, it’s equal to 102 weeks, about 17,208 hours, or about 1,032,480 minutes.
Why did I go to through the pain of these calculations? Because it’s a record. According to Kopin Tan of Barron’s, it’s the quickest doubling of the S&P 500 since 1936.
But how many individual investors actually participated in the doubling of the S&P 500? Simple indexing, eschewed by most active managers, would have resulted in an almost double. Not bad.
The problem is that it’s not that simple. I suspect many people flew by the seat of their pants with an undisciplined investment strategy, trying to do everything imaginable to avoid losses, and then trade the market on the way up. Or worse, they sold and went to cash waiting for the market to turn around to get back in.
There’s a good chance that a lot of individual investors are looking at their statements with hurt feelings, less than a double, and probably a lot of short-term capital gains tax due on any profits.
Investors who sold around the bottom and then invested after the market turned around missed their opportunity to double. Investors who jumped in and out of the market over the past 700 days based on crazy indicators such as the “Death Cross” or the “Golden Cross” may have been lucky enough to time it correctly, but I bet they missed the double after taxes, too.
I’m not advocating for or against indexing, I’m simply pointing out that the S&P 500 essentially doubled in the shortest amount of time since the 1930s. Investors who had a plan and did not fall prey to the emotional need to “do something” outside of what their financial plan called for are probably beneficiaries of their discipline and patience.
David B. Armstrong, CFA, is a managing director and cofounder of Monument Wealth Management in Alexandria, Va., a full-service wealth management firm. Monument Wealth Management is backed by LPL Financial, the independent broker-dealer and Registered Investment Advisor. David has been named one of America’s Top 100 Financial Advisors for two straight years by Registered Rep Magazine (2009 and 2010 based on assets under management) and has been interviewed by several national media sources for the past several years. David and Monument Wealth Management can be followed on their blog “Off The Wall,” their Twitter account @MonumentWealth, and on their Facebook page.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The S&P 500 index is an unmanaged index and cannot be invested into directly. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk. International investing involves special risks not associated with investing solely in the United States, such as currency fluctuation, political risk differences in accounting and the limited availability of information, and may not be suitable for all investors.
Securities and financial planning offered through LPL Financial, Member FINRA/SIPC.
Read the article on U.S. News & World Report here! >>
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“Monument”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Monument is engaged, or continues to be engaged, to provide investment advisory services. Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.
A copy of Monument’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.monumentwealthmanagement.com/disclosures. Please Note: Monument does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Monument’s website or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your Monument account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Monument accounts; and, (3) a description of each comparative benchmark/index is available upon request.
Please Remember: If you are a Monument client, please contact Monument, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.