You’ll Be Shocked to See How Few Equity and Bond Funds Have Risen for 14 Straight Years by Frank Holmes
Six years. That’s the longest duration of time that U.S. equities have consecutively risen.
Since 1871, it’s happened only twice—once between 1898 and 1903, and again between 2009 and 2014.
Meaning, if the market is up by the end of this year, we will have crossed into uncharted territory—seven straight years of sustained equity growth.
Value Partners Asia ex-Japan Equity Fund has delivered a 60.7% return since its inception three years ago. In comparison, the MSCI All Counties Asia (ex-Japan) index has returned just 34% over the same period. The fund, which targets what it calls the best-in-class companies in "growth-like" areas of the market, such as information technology and Read More
While the possibility of setting a new record certainly sounds exciting, a quick glance at the chart above reveals what some could perceive as troubling news. A majority of the gainful blocks of time lasted only two or three years before dipping into the red. What the market giveth, the market taketh away.
Yet this is how the market (normally) works. One year it’s up, the next it’s down, and there’s money to be made in both directions. As Warren Buffett famously quipped, “I’d be a bum on the street with a tin cup if the market was always efficient.”
Indeed, you can make the argument that the market tends to do exactly that which displeases the most people. But just as a smooth sea never makes a skilled sailor, an ever-efficient market never leads to skilled investment management.
If you want to know what skilled looks like, check out the following chart:
What resembles the Manhattan skyline is actually the 14 straight years of positive returns in our Near-Term Tax Free Fund (NEARX). That’s more than twice the number of such years the general equities market has delivered.
Now get this:
According to Lipper, among 26,000 equity and bond funds in the U.S., only 70 have achieved the feat of giving investors positive returns for the past 14 years.
That equates to a scant 0.3 percent.
Here’s another way of looking at it:
As you can see, a hypothetical $100,000 invested in an S&P 500 index fund in December 2000 would have taken almost 14 years to catch up to and surpass a similar investment in NEARX.
Although we can’t guarantee how the fund will perform in the future, NEARX has historically shown an ability to dodge the dramatic swings and volatility in the equities market, similar to the ones we experienced during the first decade of the century—the dotcom bubble, for instance, and the Great Recession. And there will be times, of course, when products such as an S&P 500 index fund will strongly outperform NEARX.
But unlike the equities market, NEARX has a time-tested history of no drama. As the one has swung wildly this way and that, the other has calmly, confidently ticked up each year.
What’s more, NEARX continues to maintain its coveted 5-star overall rating from Morningstar, among 173 Municipal National Short-Term funds as of 12/31/2014, based on risk-adjusted return.
The equities market can at times be an incomparable place to make money, and we hope for another (and unprecedented) year of growth.
But for those who are looking for something a little less stomach-churning, there’s NEARX. Request more information here.
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.