While the overall total return for the last decade has not been spectacular the S&P 500 stock index has been positive on a total return basis in 8 of the last 9 calendar years.  In 2008 the index dropped 37.0%.    Over the last 50 years the S&P 500 stock index has averaged a 9.3% gain annually.   While we often hear about the market averaging  9% or 10% the fact is that there wasn’t any year in which the market actually returned +9% in the last half century.  The closest that any year came to the historical average was in 1993 when the stock index gained 10.1%.    Investors need to keep in mind that the long term average is just that and is made up of a number of up and down years.

In fact over the last 50 years the market has been down 47% of the time if you look at individual days. Markets fluctuate over the short term and this is to be expected.    In 2011 the market was down 45% of the time and up 55%.

2013 proved once again why trying to time the market is impossible.  Aside from the potential for extra transaction costs and income tax implications you also have to be right both on when to sell and then when to buy again.   Moreover, most people do not own the market but a diversified portfolio.

While we anticipated continued volatility in the markets nobody can predict exactly what will happen or when.   As always we recommend that you utilize a diversified asset allocation based upon your needs, objectives and risk tolerance.  Changes to your portfolio should be made based upon changes in your situation and not the day to day or even quarter to quarter market swings.   We believe that the long term (five year) outlook for the markets is good given the historically strong fundamentals.  We also believe that there will be unexpected events and concerns that continue to create short term volatility.  The key is to stay focused on your plans and your ability to maintain your standard of living – not look at the day to day swings in the markets.   As always we are here for you should you have any questions or concerns.  We look forward to being your partner and wish you all the best for a healthy, happy and prosperous 2012!

 

Source http://www.standardandpoors.com/home/en/us .     The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market but which individuals cannot invest in directly.  All S&P 500 returns provided in the commentary calculated on a total return basis. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete