Ten years may sound like “long term” investing, unless you’re talking about the 10 years ended September 30, 2019. Without the bear market of 2008-09 in your time frame, the view becomes incredibly rosy.
A 20-year lookback provides much-needed perspective. Rather than overweighting equities based on the recent past, we believe long-term investing equates to a well-diversified portfolio. Investing is never a single-variable equation or a single question decision. Whatever the next decade brings, diversification may help you weather the ups and downs.
S&P 500® Index Total Return1
(Adjusted for CPI Inflation, Periods Ended 9/30/2019)
Past performance is not indicative of future results.
1Ned Davis Research. Calculated daily 9/29/2009–9/30/2019 and 9/29/2000–9/30/2019. 10 Year allocated to 100 on 9/29/2009. 20 Year allocated to 100 on 9/29/2000. Bear Markets are defined as declines of 20% or more. Data Sources: Bureau of Labor Statistics, S&P Dow Jones Indices. © 2019 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All rights reserved. See NDR disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo.
Cash on the Sidelines2
Money Market Funds—Net New Flows in Billions
2Source: Simfund Enterprise.
- Despite falling interest rates and more Fed cuts on the horizon, investors have been surging into money market funds in 2019.
- Yet, even with higher volatility, markets have continued to post strong returns. Those on the sidelines have missed significant growth and progress toward their goals.
- History shows that taking too little risk can be just as damaging to a portfolio as taking too much. The key isn’t to avoid being in the market, it’s to make risk management a priority. After all, no one can save their way to retirement.
Performance of a Diversified Portfolio3
3Source: Virtus Performance Analytics. See following page for composition and definitions.
The first nine months of 2019 saw double-digit returns for most global asset classes.
- U.S. equities posted strong returns across the board. The S&P 500® Index gained 20.6%, the Russell Midcap® Index was up 21.9%, and the Russell 2000® rose 14.2%.
- Overseas, developed markets outpaced emerging markets, with the MSCI EAFE® Index (net) returning 12.8%, versus the 5.9% earned by the MSCI Emerging Markets Index (net).
- Global real estate continued to outperform global equities, as the FTSE Nareit Equity REITs Index returned nearly 27% for the year to date.
- Among fixed income sectors, high yield earned a nine month return of 11.4%, while U.S. bonds returned 8.5%.
Annualized Returns In %
as of 9/30/2019
The Diversified Portfolio assumes the following weights: 20% in the S&P 500®, 10% in the Russell Midcap®, 5% in the Russell 2000®, 10% in the MSCI EAFE®, 5% in the MSCI EM, 5% in the MSCI ACWI Ex USA Small Mid Cap, 20% in the Bloomberg Barclays U.S. Aggregate, 5% in the Bloomberg Barclays U.S. Corporate High Yield Bond, 5% in the Credit Suisse Leveraged Loan, 5% in the Bloomberg Barclays U.S. Treasury Bill 1-3 Month, 5% in the Bloomberg Commodity, and 5% in the FTSE Nareit Equity REITs. Assumes annual rebalancing. Data represents total return for stated period. The Diversified Portfolio is not representative of any Virtus portfolio. Investors should consult their financial professional to identify suitable portfolio allocations. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio, or that diversification among different asset classes reduces risk.
Index Definitions—The S&P 500® Index is a free-float market-capitalization weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The Russell Midcap® Index is a market capitalization-weighted index of medium-capitalization stocks of U.S. companies. The index is calculated on a total return basis with dividends reinvested. The Russell 2000® Index is a market capitalization-weighted index of the 2,000 smallest companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The MSCI EAFE® Index (net) is a free-float-adjusted market-capitalization weighted index that measures developed foreign market equity performance, excluding the U.S. and Canada. The index is calculated on a total return basis with net dividends reinvested. The MSCI Emerging Markets Index (net) is a free float-adjusted market capitalization-weighted index designed to measure equity market performance in the global emerging markets. The index is calculated on a total return basis with net dividends reinvested. The MSCI AC World Ex USA Small Mid Cap Index (net) is a free float-adjusted market capitalization-weighted index that measures mid- and small-cap performance across 22 of 23 Developed Market countries (excluding the U.S.) and 24 Emerging Markets countries. The index is calculated on a total return basis with net dividends reinvested. The Bloomberg Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures fixed rate non-investment grade debt securities of U.S. corporations, calculated on a total return basis. The Credit Suisse Leveraged Loan Index is a market-weighted index that tracks the investable universe of the U.S. dollar denominated leveraged loans. The index is calculated on a total return basis. The Bloomberg Barclays U.S. Treasury Bill 1-3 Month Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and non convertible. The Bloomberg Commodity Index is composed of futures contracts on physical commodities and represents 22 separate commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc. The FTSE Nareit Equity REITs Index is a free-float market capitalization-weighted index measuring equity tax-qualified real estate investment trusts, which meet minimum size and liquidity criteria, that are listed on the New York Stock Exchange, the American Stock Exchange, and the NASDAQ National Market System. The index is calculated on a total return basis with dividends reinvested. The indexes are unmanaged, their returns do not reflect any fees, expenses, or sales charges, and they are not available for direct investment.
IMPORTANT RISK CONSIDERATIONS
Investing involves risks and the possible loss of principal. This report is based on the assumptions and analysis made and believed to be reasonable by the Adviser. However, no assurance can be given that the Adviser’s opinions or expectations will be correct. This report is intended for informational purposes only and should not be considered a recommendation or solicitation to purchase securities.
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