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One of my clients sent me a New York Times article from last Sunday's front page in which Charles Biderman, chief executive of a funds research company, stated that "people have lost a lot of money over the last ten years in the stock market, while there has been a bull market in bonds."
It is ce
rtainly true that a lot of people did lose money in the stock market over the past ten years. In fact, if you invested a dollar in the S&P 500 on August 1, 2000 that dollar would have been worth about 93 cents as of the end of July 2010. And, that's assuming you could invest in the index at no cost. This certainly seems to support the conclusion that the stock market has had a "lost decade." But, what happens when we take a closer look?
What if you had invested in a globally diversified portfolio of stocks in a portfolio that emphasizes exposure to value and small cap companies? That's exactly what our Talis 100 equity portfolio does. So, how did it perform over the same time period? The dollar that you invested on August 1, 2000 would be worth $2.13 and that's after all of the fund expenses and the highest advisory fee that we charge. This also assumes that all distributions are reinvested.
So, what if you had been prescient enough to have gotten out of the stock market on August 1, 2000 because you somehow saw this coming? And, what if you had taken advantage of the "bull market in bonds" by investing in an intermediate bond index? Again, assuming that there are no costs involved in doing this, a dollar invested in the Lehman (now Barclay's) corporate/government intermediate bond index would be worth $1.81. We should also point out that most bond funds failed to beat this index.
So, why does the New York Times fail to mention any of this? First, the media always feels the need to "dumb down" any analysis. Apparently, they don't think that their readers are capable of understanding a more informative article. And, it's easy to write a story that makes a very simple point - stocks are risky and dangerous, bonds are safe! Considering the attention span of many readers, that might be right. However, for investors that understand capital market behavior and the factors that actually contribute to returns, the past decade has been a very different experience.
To learn more about the performance of the Talis portfolio series, see comparisons to benchmark indexes, and access disclosure information click here.