Last time I discussed the returns you should have gotten from summer 2010 to summer 2011. We’ve had a pretty rocky two weeks in the market since then, but it shouldn’t matter to you that much if you had captured the returns over the past two years. I’ve got a feeling that most of you didn’t catch these returns and instead stayed on the sidelines.
The incredibly expanding portfolio
From summer 2010 to summer 2011 most asset classes were up around 30%. It gets even better if you go back to March 2009 — the bottom of the stock market — and you hung on for a very rewarding ride.
Just take a look at the ending values of various stock/bond allocations starting with $500,000 in March 2009 and ending in June 2011:
Over this time frame the stock portion of your portfolio should have at least doubled. More conservative portfolios should be up 50% or more. Diversified portfolios were up even more.
So how did you do over the past year or two? Did you capture these returns, or did you stay on the sidelines? Do you even know what returns you got?
If you’ve been practicing medicine for more than 10 years and have accumulated some assets and are saving regularly, you should be far wealthier now than you were two years ago. And that’s even accounting for the great recession of 2008. Your portfolio should be worth more now than it was before 2008 — assuming you hung on and continued to invest new money.
If you’re managing your portfolio by yourself and you don’t have a far higher portfolio value now than you did two years ago, you lack investment discipline and need a sound investment plan.
If you’ve got a financial advisor managing your portfolio and didn’t achieve these results, your advisor did one of the following:
1. Timed the market and missed big time
2. Did not diversify your portfolio
3. Lacks an investment philosophy
If that’s the case, you need to seriously question what investment philosophy and strategy your advisor has — if he even has one to begin with.
So take a look back at your investment statements and figure out your returns. If you missed the boat this time, create a sound investment plan so you can ride the wave next time.
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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