2009 Market Returns and 10 Year Returns

By on January 2, 2010

Despite the 2009 return on the S&P 500 of 26.6%, investors who put $10,000 in stocks on Dec. 31, 1999, have $9,090 now, while the same amount in 10-year Treasury notes would have grown to about $18,000 following a 6.1 percent annualized return, according to data compiled by Bloomberg. A $10,000 investment in the Reuters/Jefferies CRB Index of 19 raw materials increased 3.3 percent a year to $13,803. Gold futures rose 14 percent a year, turning $10,000 into $37,852.

The average annualized return for U.S. equity mutual funds was 1.7 percent during the decade. Hedge funds’ annualized return was about 6.3 percent since Dec. 31, 1999, according to Hedge Fund Research’s HFRI Fund Weighted Composite Index. The measure rose 19 percent in 2009 through Dec. 15.

“Those who benefited in the decade were short-term investors who were able to take advantage of the volatility in the stock market,” said Komal Sri-Kumar, who helps manage $118 billion as chief global strategist at TCW Group Inc. in Los Angeles. “That isn’t the signal authorities should give players in the market. You want them to think of it as a place where you can save for your retirement.”

SMA Comment: Actually, if you held a more widely diversified portfolio (small cap along with large; both international and domestic) you would have had positive returns over the 10 years. I’m guessing it would have been over 3 percent per year. Yes, diversification still works if you go about it intelligently (see links –> Marketwatch, The Intelligent Asset Allocator) I’m also skeptical of the hedge fund results. I’ll have to research if there is any survivorship bias in those numbers. The SMA portfolio returned 34.9 percent in 2009. The 10 year results are forthcoming.

Source: Bloomberg

Don’t Need A Gun – Billy Idol

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