In 2009, diversiﬁcation came back into vogue. All stock asset classes, REITS, commodities and bonds had positive returns last year. In 2008, the only asset classes that didn't lose were cash, CD's and short-term bonds. We believe that diversiﬁcation works over the long-term and that 2009's outperformance by certain asset classes such as domestic and international small cap equities and value equities is repeatable.
As we enter the season of giving and giving thanks, I realize with some regret that I haven't been as charitable this year as in years past. But, I justify, how could I possibly give as I have in the past? My income is off by 50% this year! Surely if there's a time to cut back, to retrench, to be more conservative, this is it.
My Volvo wagon is 12 years old, has soiled carpets (I've got two kids!) and the stitching on the leather seat is coming undone. But, the most irritating thing is the driver's door which creaks like a train braking as it enters Grand Central Station.
If you have been holding your breath since asset values started to decline last year, we suggest you relax and breathe a little. From April through June most of the stock, real estate, and commodity mutual funds we use increased in value by 15% to 35%.
How long does it take to master the piano, golf, carpentry, cooking, chess? Most of us would answer years, if not decades. But the field of investing is very different; instead of producing stellar results the most seasoned investment managers underperform a basic index fund.
We extend our gratitude to those who attended and participated in our recent Town Hall Meetings. The positive response to these events conﬁrms our belief in the power of communication, especially in times of difficulty. How do we stand on solid ﬁnancial ground when the markets and economy are shifting beneath us so dramatically?
As of October 10th, the S&P 500 is down 37% for the calendar year, a decline unmatched since 1931's slide of 43%. And unlike the crashes of 2000-2003 and 1973-1974, diversification into different asset classes has not reduced the carnage. International and small stocks have been hurt even more than the U.S. blue chips.