Investing Concepts - Private Briefing for clients of Mike Gegen Data - - PowerPoint PPT Presentation
Investing Concepts - Private Briefing for clients of Mike Gegen Data Updated as of December 2014 W ealth Managem ent | Capital Markets I nvestm ent Banking | Private Equity | Asset Managem ent Chicago Frankfurt London Milwaukee
W ealth Managem ent | Capital Markets – I nvestm ent Banking | Private Equity | Asset Managem ent Chicago Frankfurt London Milwaukee Shanghai w w w .rw baird.com
Source: Standard and Poor’s, Baird analysis. The S&P 500, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common stocks. Intra-year losses are calculated as the largest point-to-point loss in a given year, calculated on a weekly basis. Indices are unmanaged, and are not available for direct investment. Past performance is not a guarantee of future results.
S&P 500 Annual Returns and Maximum I ntra-Year Losses
38 23 33 29 21
29 11 5 16 5
26 15 2 16 32 14
10 20 30 40 50 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Gain/ Loss (% )
Full Calendar Year Return Largest Intra-Year Loss
Robert W. Baird & Co. As shown in this chart, even in years of strong gains the market can experience pronounced temporary losses. It is important to remember that markets can be volatile and overreactions to losses (or gains) can be detrimental.
$100 $1,000 $10,000 $100,000 $1,000,000 $10,000,000 Dec-27 Dec-29 Dec-31 Dec-33 Dec-35 Dec-37 Dec-39 Dec-41 Dec-43 Dec-45 Dec-47 Dec-49 Dec-51 Dec-53 Dec-55 Dec-57 Dec-59 Dec-61 Dec-63 Dec-65 Dec-67 Dec-69 Dec-71 Dec-73 Dec-75 Dec-77 Dec-79 Dec-81 Dec-83 Dec-85 Dec-87 Dec-89 Dec-91 Dec-93 Dec-95 Dec-97 Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
Growth of $1,000 in the S&P 500 I ndex (Since 1927)
The Crash of ’29 The Great Depression World War I I Oil Embargo S&L Crisis 9/ 11 Attacks Dot-Com Bubble Burst Financial & Credit Crisis Operation Desert Storm Vietnam War Black Monday ‘87 Korean War
Source: Standard and Poor’s, Ibbotson Associates, Baird Research. As of December 31, 2014. Past performance is not a guarantee of future results. Performance is calculated on a total return basis with dividend reinvestment. The S&P 500, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization
Robert W. Baird & Co.
$20,947 $18,883 $15,821 $12,639 $9,031 Fully Invested Miss Best 1 Month Miss Best 3 Months Miss Best 6 Months Miss Best 12 Months
Source: Standard and Poor’s, Morningstar Direct, Baird Research. For the 10-year period ending 12/31/14 (total 120 months). Past performance is not a guarantee of future results. Performance is calculated on a total return basis with dividend reinvestment. The S&P 500, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common stocks. Indices are unmanaged and are not available for direct investment. Past performance is not a guarantee of future results.
How Missing Large Market Moves I mpacts Wealth Creation (Growth of $10,000)
Robert W. Baird & Co. Attempting to time the market’s gains or losses is a tricky proposition and can come at a great cost. This chart illustrates how missing even one month in the market can impact longer-term results. While ongoing portfolio modifications can be beneficial, large and frequent allocation changes are often detrimental.
21% 20%
1927: + 37% 1926: + 12% 17% 1928: + 44% 1949: + 19%
1933: + 54% 15% 1952: + 18% 1935: + 48% 13%
1959: + 12% 1942: + 20% 1936: + 34%
1964: + 16% 1943: + 26% 1938: + 31% 1947: + 6% 1965: + 12% 1944: + 20% 1945: + 36% 1929: -8% 1948: + 6% 1968: + 11% 1951: + 24% 1950: + 32% 1932: -8% 1956: + 7% 1971: + 14% 1961: + 27% 1954: + 53% 1934: -1% 1960: + 1% 1972: + 19% 1963: + 23% 1955: + 32% 7% 1939: -0% 1970: + 4% 1979: + 18% 1967: + 24% 1958: + 43%
1946: -8% 1978: + 7% 1986: + 18% 1976: + 24% 1975: + 37% 1953: -1% 1984: + 6% 1988: + 17% 1982: + 21% 1980: + 32% 3% 3% 1940: -10% 1962: -9% 1987: + 5% 1993: + 10% 1983: + 23% 1985: + 32%
1941: -12% 1969: -9% 1992: + 8% 2004: + 11% 1996: + 23% 1989: + 31% 1957: -11% 1977: -7% 1994: + 1% 2006: + 16% 1998: + 29% 1991: + 31% 1931: -43% 1930: -25% 1966: -10% 1981: -5% 2005: + 5% 2010: + 15% 1999: + 21% 1995: + 37% 1937: -35% 1974: -26% 1973: -15% 1990: -3% 2007: + 5% 2012: + 16% 2003: + 29% 1997: + 33% 2008: -37% 2002: -22% 2001: -12% 2000: -9% 2011: + 2% 2014: + 14% 2009: + 26% 2013: + 32%
0% t o + 10% + 10% t o + 20% + 20% t o + 30% + 30% or more
Average Posit ive Ret urn 22%
% Negat ive Annual Ret urns 27% % Posit ive Annual Ret urns 73% Average Ret urn (all years) 12%
Average Negat ive Ret urn
Source: Standard and Poor’s, Ibbotson Associates, Baird Research. Past performance is not a guarantee of future results. Performance is calculated on a total return basis with dividend reinvestment. The S&P 500, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common stocks. Indices are unmanaged and are not available for direct investment.
S&P 500 I ndex Annual Returns (1926 – Present) Distribution of Annual Returns
Robert W. Baird & Co.
5.0 9.2 0.7 7.7 2.8
2 4 6 8 10
Average Equity Investor S&P 500 Index
Investor Barclays Aggregate Bond Index Inflation (CPI) 20-Year Annualized Ret urn (% )
Source: Dalbar, Inc. “Quantitative Analysis of Investor Behavior, Advisor Edition.” April 2014. Average equity and bond investor returns are calculated using data from the Investment Company Institute for the 20-year period ending December 31, 2013. The “average” investor refers to the universe of all mutual fund investors whose actions and financial results are restated to represent a single investor. These returns are represented by a change in assets, excluding sales charges, fees, expenses and any other costs. While we believe this information to be accurate, no guarantees can be made to its authenticity or accuracy. Indices are unmanaged, and are not available for direct investment. Past performance is not a guarantee of future results
How the Average I nvestor Has Fared
Robert W. Baird & Co. Over the 20-year period ending December 2013, the average investor underperformed both the broad stock and bond markets. Investors also failed to keep pace with inflation. Poor investment selection and knee-jerk reactions are key reasons for this underperformance.