Stock It to Me!
Investment advice and commentary from the pros
This months featured advisor
and commentary…
Starboard Asset Management,
Inc.
A Registered Investment Advisory Firm
Robert J. Vanas, Jr. CFA, President
Welcome to the inaugural of “Stock it to me!” In this and upcoming commentary, I hope to provide you valuable insights into market dynamics, stock analysis, portfolio management, and related topics. I hope it proves useful to you! -rjv
- Great Expectations -
After two arduous years of significant stock market losses, last year was certainly sweet. Investors finally had something to smile about ... with the S&P 500 gaining 28%, and the NASDAQ up some 50%. It was enough to make us feel things were back to 'normal', right?
But hold on there... Don't start thinking the 'good old days' are back for good. While 2003's strong performance might evoke memories of the late 90's, in actuality history shows a 28% return is far from 'normal'. And we all know by now (or we should), that no one can predict where the market is going over the short-term. So why not consider what the average five-year stock market returns have been over the past four decades:
S&P 500 Index: 5 year Average Returns
|
DECADE |
RETURN |
|
The Nineties: |
13.9% |
|
The Eighties: |
10.3% |
|
The Seventies: |
1.9% |
|
The Sixties: |
6.6% |
(More food for thought: Over the past 50 years, the average 5 year return was 9%!)
The point is.... GET REAL! Investors should set realistic expectations for their portfolios... If the past 50 years is any indication, then one's portfolio will most certainly not average 28%, 20%, or even 15% per year.
So what's a realistic expectation? The best advice is to err on the conservative side. While you might get 15 or 20% per year for even a few years in a row, if your expectations are realistic you won't be surprised by a year or two where you miss your target (as in our recent bear market).
At Starboard Asset Management, we tell clients they should expect the stock market to return 10% per year, on average. And one's holding period should be at least three years, preferably five. We also advocate portfolios should be well-diversified and of high quality (stocks with A or better S&P ratings).
Finally, by using stocks that pay reasonable dividends to shareholders (or a 2-3% yield), one can build even greater confidence in achieving a 'realistic return'.... But that's another subject... In fact, it's the subject of my next 'Stock it to me'! -rjv
☼Please Note: Starboard Asset Mgmt is in no way affiliated with StockFunnel.com. Neither the information nor any opinion expressed in this report constitutes an offer to buy or sell any security. Further, this report is prepared for general circulation & does not have regard to the specific investment objectives or particular needs of any person who may receive this report. Officers of Starboard Asset Mgmt may have a financial interest in securities mentioned in this report.