Wednesday, February 29, 2012

February 2012 Stock Market Update

Stock market (DJIA) monthly performance / closing prices for last 12 months

Dow Testing 13,000

In February, the Dow reached not only a new 52-week high but a multi-year high, besting 13,000 for the first time since May 2008. After failing multiple times, the Dow finally closed above 13,000 on February 28th, but couldn't hold on through month-end.

The lack of market volatility continued. Again there was not a single +/- 2-3% day, and only once did the Dow move more than 1%. The DJIA (Dow Jones Industrial Average) just quietly continued its apparently inexorable march upward, ending the month

Wednesday, February 22, 2012

Why Mutual Fund Owners Earn Lower Returns Than The Funds They Own(!)

Mutual fund owners earn lower returns than their funds report. And, it's not because the funds are lying.

In an earlier post we saw that investors earn significantly less than the theoretical, published overall market returns. In this post we'll see that they also earn less than the published returns for the funds that they actually own! How can that be? Read on.

Mutual Fund Returns vs. Investor Returns (aka Dollar-Weighted Returns)

investor returns, asset-weighted and dollar-weighted returns

The graph above (click to expand) shows that between 1991 and 2010 the return for the average stock fund was 9.9% per year. For this same period, the average stock fund investor earned just

Tuesday, February 14, 2012

The Easiest Way to Increase Investment Returns? Reduce Expenses!

This post highlights the huge impact that just one or two percent in yearly expenses can have on your long-term investment performance. The impact is the same for bonds as it is for stocks.

A previous post discusses expenses that reduce the theoretical, published investment returns -- including taxes, commissions & loads, mutual fund expense ratios, and trading costs. In that post, we saw that these expenses could cut the size of your retirement portfolio in half! Frankly, I was surprised at the magnitude of the impact. How can shaving only one or two percentage points off your annual return have such a huge impact? Read on.

The Impact of an Additional 1% in Annual Return on Investment (ROI)

Impact of expenses on stock and bond market investment returns

The above chart (click to expand) shows

Wednesday, February 1, 2012

January 2012 Stock Market Update

Stock market (DJIA) monthly performance / closing prices for last 12 months

U.S. Markets Off to Solid Start

The turmoil in Europe continues. In January, S&P downgraded the debt of nine of the Euro countries. Among the downgrades was a downgrade of France from AAA to AA+. U.S. markets shrugged off the continuing concerns about Europe and delivered their best January performance in 15 years.

The volatility that characterized 2011 was nowhere to be seen; there was not a single +/- 2-3% day. Only once did the Dow move more than 1% -- a 1.5% increase on the first trading day of the year. Instead, there was a calm, and reasonably steady, upward progression. The DJIA (Dow Jones Industrial Average) ended the month