Market Frustration 

If you look at the returns of S&P 500 during the twenty years from 1979 to 1999, there were only two down years: 1981 and 1990. Our expectations from the 80's through the 90's had us so optimistic that most investors (and professionals for that matter) made the mistake of projecting high rates of return in the double digits through the foreseeable future (and throughout retirement). The past twelve years have taught us that those expectations were unrealistic.

Because of the losses many sustained in the past twelve years, the "lost decade", and current global financial uncertainly, the pendulum has now swung the other way. Investors now worry that they'll never be able to earn more than a couple of percent on their investments-if they're lucky. I believe that we've gone from being too optimistic to too pessimistic about our future.

If you look back at the S&P 500's annual returns from 1926 through 2011, you'd see that the market goes down over 28% of the time. We've seen two down years in the past ten years and four in the past twelve. Even with that, we're only seeing negative years slightly above the 85 year average (just over 33% from 2000 to 2011).

According to Morningstar.com, the S&P 500 is up 6.34% for the ten years ending July 31, 2012. While not the average annual return of 9.8% that the S&P 500 had enjoyed from 1926 through 2011 (source: Standard and Poor's), it is certainly a step ahead of the "lost decade" from 2000 to 2010 when the stock market was essentially flat.

The lesson we should have learned over the past twelve years is that assuming a high return of 10%+ during retirement is unrealistic. We should use a more conservative rate when projecting those returns and we should prepare ourselves for down years. That said; we also shouldn't fear that the stock market sky will fall. We've simply been reverting to the mean.

Plan reasonably, prepare yourself (and your portfolio) for down years, and monitor your retirement plan and investment mix on a regular basis. These are the keys than can help lead to success.

This article is for informational purposes only and is not intended to provide specific advice to any individual. Consult your legal, tax, and/or financial advisor to determine what is appropriate for your situation.  Indexes are unmanaged and investors are not able to invest directly into any index. Past performance is no guarantee of future results.  

Office Closings ...  

The office will be closed on September 3rd in observance of Labor Day.

Paws for a Cause...

This year's Paws for a Cause is scheduled for Thursday, September 13th.  We're going to be at Mustang Alleys for the event and will be sponsoring the Cat Rescue of Maryland and Adopt a Homeless Animal Rescue: "A Pit Bull Friendly Rescue".  We'll send more detailed information in a later release. 

Just a reminder ...

We are always accepting donations for the local animal shelters - toys, tennis balls, collars, leashes, food, cat litter, cardboard trays, office supplies, cleaning supplies, towels, mats, washcloths, etc. We will accept donations Monday-Friday between 9AM & 5PM.