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Courage, Dear Investor Thumbnail

Courage, Dear Investor

Mike Earl, CFP®, CPWA®

I’m quick to admit that owning – and holding – stocks is not easy.

I’ll never forget the moment a close family member (who shall remain nameless) told me in August 2011:

“I never want to own stocks again. Get me out of stocks – completely.”

His exasperation with stocks was understandable – at that time. Stocks had delivered negative annualized returns for more than 11 years at that point; the so-called “Lost Decade” for US stocks.

  • The S&P 500 Index peaked at 1,552.87 in the spring of 2000, and it closed at 1,119.46 on August 6, 2011. That’s a 28% decline (excluding dividends) over an 11-year + period. Ouch.
  • Even with dividends included, a $10,000 investment in the S&P 500 Index on March 27, 2000, declined to $9,060 on August 6, 2011. It’s hard to imagine holding an investment for 11 years, only to have less money at the end than when you began.
  • Conversely, a $10,000 investment in US bonds during that period would have nearly doubled to $19,355. Bonds sure looked attractive at that time.

So where do we stand today? Following the gaudy returns in stocks during the 2010s, what will the 2020s hold? Could we be embarking on a 2000s-like decade?

While I can’t answer those questions, I do look for charts that will give me courage to remain an equity investor. As the presidential election looms, some of our clients have expressed angst about their portfolios.

One of the most commonly-cited sentiment gauges is fund flows. Is money flowing out of stocks or into stocks?

Thus far in 2020 (through 9/30), a record $242 billion has flowed out of stocks. In the past, large outflows from stocks have been a contrarian signal of future good performance from stocks.

 The usual caveats apply: no signal is perfect nor anywhere near 100% accurate. This time could be different. Nonetheless, it’s clear that investors are not in a greed-fueled state, pouring money into stocks. If anything, there is a lot of skepticism about equity markets right now – which is a good thing.

Regardless of the presidential election outcome – and regardless of how the coronavirus situation evolves – great companies in the US and abroad will continue to offer great products and services. Let’s drill down inside the US stock market to highlight some of these amazing companies:


Investing in the stock market means owning slices of these companies (and thousands more!) that are innovating each day!

P.S. Hat tip to C.S. Lewis for the title of this post.

1) www.koyfin.com
 2) https://www.spglobal.com/spdji/en/

Because The Wealth Group, Austin B. Colby & Associates is independent of Raymond James, the expressed written opinions above are our own and not necessarily reflective of Raymond James’ opinions.

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