Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

Stock Returns at Half the Risk

November 10, 2010 By Dick Young

Including dividends, the S&P 500 is now up 7.5% YTD. Not bad. At a 7.5% compounded annual return, you would double your money every 10 years. But when you consider the volatility that stock market investors had to endure to earn that 7.5%, it doesn’t sound so compelling. Study my chart below. The grey line is the growth of a $100 investment in the S&P 500 at year-end 2009. To start the year, the S&P fell more than 4%. Then it rallied about 15% over the ensuing three months. When sovereign debt issues intensified in Europe, the index sold off sharply, falling more than 15% from its high only two months earlier. From early July to early August, stocks jumped 10%, but then fell almost 7% over the following month. Since the end of August the S&P has gained almost 15%. The ups and downs are enough to give one a painful case of whiplash.

Instead of investing entirely in stocks, I advise my subscribers to take a balanced approach. I favor portfolios that include fixed income, stocks, currencies, and gold. For 2010, I’ve recommended as a general point of reference a 60-30-10 mix of fixed income, stocks, and currencies and gold. In the chart below, I assume a portfolio with 60% split between investment grade corporate bonds and agency mortgage bonds, 10% split between gold and the Swiss franc, and 30% in the S&P 500. In practice, for the stock portfolio, I favor dividend payers only, but the S&P is a suitable stand-in for purposes of comparison.

The YTD return of my balanced portfolio matches the return of the S&P 500, but with less than half the volatility. When the S&P fell more than 15% in May and June of this year, my balanced portfolio gave up only 3%. And when the S&P jumped 15% in the last two months, my balanced portfolio gained about 5%. Both the S&P and my balanced portfolio are up 7.5% YTD, but the balanced portfolio had a much smoother ride.

For investors in or nearing retirement, the gut-wrenching volatility of an all-stock portfolio can lead to sleepless nights and emotionally charged investment decisions. A balanced approach offers the comfort and peace of mind necessary for long-term investment success.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Risk Analysis for Consistent, Positive, Prudent Returns
  • Risk and Reward: An Efficient Frontier
  • No Stock is Worth 100% of Your Time or Money
  • Author
  • Recent Posts
Dick Young
Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.
Latest posts by Dick Young (see all)
  • PRICES SOAR: Diesel Shortage Could Cripple America’s Economy - May 13, 2022
  • Young’s Retirement Compounders Clearly Dominate! - April 26, 2022
  • The Magic of Compound Interest - April 5, 2022

Search Young Research

Most Popular

  • Will the Fed Stick to Its Course?
  • RECESSION? Dow 25,000, $8 Gas, Rising Interest Rates, Spell Mid-term Crack Up
  • Investing During a Recession
  • Swiss National Bank Surprises World with Rate Hike
  • Kellogg Cuts Loose with Split Plan
  • The Power of a Compound Interest Table
  • MONEY TALKS: The Best Service in Paris
  • Predictions of MEGA-SPENDING on Metaverse
  • Apple Shares Resilient in the Face of Recession
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Greetings From Paris & Le Bristol Hotel
  • The Most Controversial Restaurant in Paris?
  • Your Survival Guy: Clearing the Decks, Buying a Boat, Seeing the World and More
  • Russia’s “Unsubtle” Artillery Attacks Not Necessarily “Archaic”
  • FLORIDA DODGED A BULLET: Elected Superb DeSantis Over Unstable Gillum
  • Biden, a Job Killing Machine
  • Good News for the 2nd Amendment
  • La Fontaine De Mars: Best Sunday Paris Lunch
  • My 10 Favorite Books about France, Plus a Bonus for You
  • BREAKING: Supreme Court DISMANTLES New York’s Unconstitutional Gun Laws

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2022 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.