You know that we are a strong advocate of having a good financial plan. However, sooner or later you have to make the plan happen…and it is investments and how you act on them that make it possible. Let us purely focus on the numbers here because we’ve been talking about equities and faith in the private markets for a year. In that light, let’s see what happened in your portfolio. Contrasted against all the below numbers, while you are jaw dropping reading them, keep in mind how dramatic they are when returns on the average savings account is 1/10th of 1% if lucky.
For your domestic United States stocks (through which you own 3,054 companies in your Core II), you saw a 2012 return of 18.08%.[i]
For your international developed country stocks (through which you own 5,012 companies in your Core), you experienced a gain of 18.74%.[ii]
For your emerging market stocks (through which at year end you owned 3,759 stocks in your Core), you benefited with a 20.49%[iii] gain.
Yes, I know I have told you staying tough when everyone else was running scared was good, but wow!
A little education if you would tolerate me. We employ an investment approach here called ‘actively-filtered, deeply-passive”. We don’t have enough time to enumerate all of the details of what means (though you can ask me at any timeJ). The philosophy of being “passive” in your investments mostly means;
- You are not trying to sell Apple and buy Google (security selection); Doesn’t work consistently. Look how Facebook shareholders are feeling.
- By investing you are not trying to say “it’s a good time to be in the United States and let’s get heck out of Europe” (sector rotation). Doesn’t work consistently and it certainly cost some folks a lot of money this past year.
- You avoid listening to any stock guru, economist, investment advisor who says “Man, this is the time” (let’s get in / out and time the market).
Contrast the above against hedge-funds as well, as they are frequently in the news. Over the past 10 years, hedge-fund managers have under-performed not just the market, but inflation as well (The Economist (December 22, 2012)). Oh, and for that delightful cuisine they charge higher fees and generally take 20% of the profits. Paraphrasing from the guy shouting in the movie: “Show me the pudding!”
The key, and the only proven method of doing well, is having a plan and holding to it. You have done it.
The person who really deserves the compliment here is not Wellspring…it is you. No false praise here. You listened. You had your own misgivings (if you didn’t, you’re not human) and you trusted in the course we had set. The recognition is to you, and because of that, the gains are for you.
[i] Dimensional Core Snapshots, Annual; 2012
[ii] ibid
[iii] ibid
