Despite the headlines, it’s been a solid year for investing. In fact, if you’ve been investing and you don’t have a far higher portfolio value now than you did two years ago, you may be in serious need of a new investment plan.

For the past few years all you’ve been hearing is pessimism. Just read the headlines from major newspapers and magazines in summer 2010 and summer 2011:

If you were paying attention to all of this a year ago, it would have been tough to invest your hard earned highly taxed money in the market. Trends in employment, housing, and economic growth have remained negative over the past year. May as well just stuff the money under the mattress and work more shifts, right?

But amidst the barrage of gloomy news, let’s take a look at what your investment returns should have been over the past year, from July 2010 to June 2011.

A Very Good Year 

At right is a summary of how different investments performed over the past year. 

As you can see, stock markets around the world had spectacular returns during this time period. If someone had told us a year ago that global markets would stage such a strong rally, you would be inclined to think that the economic outlook would have improved. Instead who would have thought that with US unemployment at 9%, the Japan tsumani, the US and European debt crises, and other end-of-the-world news, that markets could thrive in such an environment?

No Summertime Blues

But let’s say you ignored the summertime headlines. Here are the gains you should have had with various stock/bond allocations over this past year assuming you started with $500,000 in July 2010. Nothing to complain about here.

The Incredible Expanding Portfolio

It gets even better if you go back to March 2009--the bottom of the stock market--and you hung on for a very rewarding ride.

Just take a look at the ending values of various stock/bond allocations starting with $500,000 in March 2009 and ending in June 2011.

Over this time frame the stock portion of your portfolio should have at least doubled. More conservative portfolios should be up 50% or more. Diversified portfolios were up even more.

Your Returns

So how did you do over the past year or two? Did you capture these returns, or did you stay on the sidelines? Do you even know what returns you got?

Seasoned EPs should be far wealthier now than you were 24 months ago.

If you’re managing your portfolio by yourself and you don’t have a far higher portfolio value now than you did 2 years ago, you lack investment discipline and need a sound investment plan.

If you’ve got a financial advisor managing your portfolio and didn’t achieve these results, your advisor did one of the following: 

  • Timed the market and missed big time
  • Did not diversify your portfolio
  • Lacks an investment philosophy

So take a look back at your investment statements, figure out your returns, and if you missed the boat this time, create a sound investment plan so you can ride the wave next time.

Setu Mazumdar, MD practices EM and he is the president of Lotus Wealth Solutions in Atlanta, GA www.lotuswealthsolutions.com



# pharmacistjon 2011-09-16 01:57
erm... you might want to consider stretching those graphs out till august. The last several weeks have been a little less upticky

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