For the past few years all you’ve been hearing is pessimism.
Just read the headlines from major newspapers and magazines in summer 2010 and summer 2011:
Summer 2010 Summer 2011
“Housing Prices Remain Weak" “Home Market Takes a Tumble"
Wall Street Journal, May 26, 2010 Wall Street Journal, May 9, 2011
"Fear Returns — How to Avoid a Double-Dip Recession" "Jobs Data Stoke US Recovery Fears"
Economist, May 29, 2010 Financial Times, June 4, 2011
"Discouraging Job Growth Batters Stocks" "The World Economy — Sticky Patch or Meltdown?"
Los Angeles Times, June 5, 2010 Economist, June 18, 2011
If you were paying attention to all of this a year ago, it would have been tough to invest your hard-earned, highly-taxed money in the market. Trends in employment, housing and economic growth have remained negative over the past year. You may as well just stuff the money under the mattress and work more, right?
But amidst the barrage of gloomy news, let’s take a look at what your investment returns should have been over the past year, from July 2010 to June 2011.
A Very Good Year
Here is a summary of how different investments performed over the past year:
As you can see, stock markets around the world had spectacular returns during this time period. If someone had told us a year ago that global markets would stage such a strong rally, you would be inclined to think that the economic outlook would have improved. Instead who would have thought that with U.S. unemployment at 9%, the Japan tsunami, the U.S. and European debt crises, and other end-of-the-world news, that markets could thrive in such an environment?
No Summertime Blues
But let’s say you ignored the summertime headlines. Here are the gains you should have had with various stock/bond allocations over this past year assuming you started with $500,000 in July 2010:
Nothing to complain about here. But if you bailed out of the market and didn’t get back in, then you missed out on the incredible gains over the past year.
Next time, I’ll discuss what returns you should have gotten over the past two years.
Setu Mazumdar, MD, is president of Lotus Wealth Solutions in Atlanta and a fee-only financial planner who works exclusively for physicians. He is also a board certified emergency medicine physician, who loves spending time with his family. Setu welcomes comments at email@example.com. You can also visit his website at www.lotuswealthsolutions.com, or call (404) 386-7641.
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