Most investors don't know stocks are surging
Did you know that the S&P 500 is up 16% so far this year and has more than doubled off the 2009 lows?
Most investors do not. In fact, many think that the stock market declined in each of the past three years. It’s a likely reflection of negative investor sentiment that still lingers after many investors were burned in the 2008 financial crisis.
As Jeff Benjamin at Investment News reports, Franklin Templeton asked 1,000 investors whether they thought the S&P 500 was up or down over each of the past three years; 66% thought it was down in 2009, 48% thought it was down in 2010; 53% thought it was down last year.
The S&P actually rose 26.5% in 2009, 15.1% in 2010, and 2.1% last year.
Staying extremely risk averse and mostly or completely out of stocks may be perceived as safe. But it may be hurting some investors.
Invest $10,000 in a money market account -- one of the most conservative investments out there -- and you’ll earn 0.16%, on average, according to Bankrate.com. That works out to $16 a year. That is likely not enough to even make up for future inflation.
So in real terms, that account is likely losing money over the long haul.
Treasury bonds are yielding more, but still less than 2% since May. Depending on the inflation rate going forward, it offers a very slight gain, if any at all.
Stocks are riskier investments than bonds of course, and they are not for everyone.
However, there are strategies that invest in dividend-paying stocks, most of which are less volatile than the market overall.
There is a good deal of academic research that says that low-beta stocks will outperform the market over the long haul. That flies in the face of the long-held theory that investors are paid more to take on extra risk.
If you want to talk about how potential market events or the fiscal cliff might affect your equity portfolio, and perhaps talk about whether some of our defensive-minded investment strategies might be right for you, write Multiplywealth at firstname.lastname@example.org It’s your own account; you can see the balance change on a daily basis, make investment changes extremely quickly, and add to or pull your money at your complete discretion.