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Paul B. Farrell
July 13, 2010, 12:01 a.m. EDT · Recommend (2) · Post:
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Conspiracy of Weasels is killing real reform
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Alcoa sets a cautiously positive tone
By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Yes, Happy Birthday! Something new with the Lazy Portfolios -- 10-year returns. As of last month, every fund in the eight Lazy Portfolios has a 10-year track record.
So let's celebrate, throw some hoopla, strike up the band, start cheering. Why? Because all eight Lazy Portfolios have some big bragging rights: All the portfolios beat the S&P 500 stock index the past decade!
A recent study showed that five-star Morningstar funds didn't beat one-star funds over the last decade.
More cheers: The Lazy Portfolios also beat Wall Street's performance. Wall Street started 2000 with the DJIA peaking at 11,722. Ended the 2000-2010 decade at 10,428. Ooops. That means Wall Street lost over 20% of your retirement, adjusted for inflation. Get it? After a decade of frantic buying, selling, trading and churning, the Wall Street casino comes up a loser, in negative territory, a very big loser.
So stick with a Lazy Portfolio. All eight are simple, diversified, well-balanced, easy-to-manage portfolios of just three to 11 low-cost, no-load index funds. No active trading. You simply rebalance when you add new savings. That's all you need to beat Wall Street stock market losers.
What about the future? Will you beat Wall Street again in the 2010-2020 decade? Yes, if you bet on the odds. We all know the standard legal warning: "Past performance doesn't guarantee future results." And yet, we all project the past. So you'd be a fool not to at least suspect that Wall Street's miserable past performance will continue in the future decade. Yes, you better predict the Wall Street casino will lose another 20% of your money by 2020. Get it? Wall Street's on a losing streak, and losers lose.
Another big reason for predicting that Wall Street will lose another 20% of your hard-earned retirement money in the coming 2010-2020 decade is that the so-called financial reforms are just window dressing, with Wall Street back to business as usual doing the same things guaranteed to repeat the 2008 meltdown, only bigger.
So you can bet Wall Street's high-frequency traders will be ramping up their gambling casino operations, skimming more of your returns off the top, making themselves richer on mega-bonuses, while socking it to you with even bigger losses as investors, and worse, as taxpayers.
Want more proof of problems ahead? Check out that leading market indicator, the Russell 2000 index of small-company stocks. They're in a bear market. Dropping more than 20% since the April high. No way to start the decade.
Also, Pimco's Bill Gross is sounding the warning bell. In InvestmentNews: "Global financial market returns stand at the threshold of mediocrity. With bonds priced not for recession but near depression, most major global bond indices now yield less than 3%, surely a forerunner of returns to come."
So expect lower returns, more volatility, higher risk of capital losses, as Wall Street gets more aggressive to justify their mega-bonuses knowing that congress will be stupid enough to bail them out again when the next meltdown comes in a few short years.
Yes, we're on a roll, all eight Lazy Portfolios are in positive territory the past year and on a longer-term 5-year and 10-year basis. New data was provided by Morningstar's research analyst Annette Larson. Not only are the "Fab 8" in positive territory, all eight are beating the actively traded S&P 500, often by more than 6 percentage points.
Get the latest data and learn how to build your own Lazy Portfolio in our Lazy Portfolio Center.
Short-term, half were slightly under the S&P and a couple of the other four beat the S&P by 4 to 6 points. And remember, these portfolios have had little or no changes in asset allocations or trading in the past decade. Proof Lazy Portfolios work because they're based on the Noble Prizewinning Modern Portfolio Theory.
First, an overview:
Source for all tables: Morningstar data as of June 30. 3-, 5- and 10-year returns annualized
Ted Aronson's firm, AJO Partners, manages $17 billion of institutional assets. His Lazy Portfolio is his family's taxable portfolio. It does well even though not in a tax-free pension fund.
He gave me a great answer when I asked him once about selling when he sees a bear coming: For two big reasons Aronson would "hold tight. The good include my faith in capitalism and its ability to weather a storm, even one of biblical proportions. The bad reason is, I have no faith in my ability to time this sort of thing. Even if I got out in time, I probably wouldn't be able to correctly time getting back in!"
Win the lazy way.
Paul Farrell writes the column on behavioral economics. He's the author of nine books on personal finance, economics and psychology, including "The Millionaire Code," "The Winning Portfolio," "The Lazy Person's Guide to Investing." Farrell was an investment banker with Morgan Stanley; executive vice president of the Financial News Network; executive vice president of Mercury Entertainment Corp; and associate editor of the Los Angeles Herald Examiner. He has a Juris Doctor and a Doctorate in Psychology.
Alcoa Inc. kicked off the second-quarter earnings parade Monday with a modestly bullish summary of the global aluminum market. It was the note investors both hoped to hear and feared would be missing.
6:25 p.m. July 12, 2010 | Comments: 18
- BearFund | 1:05 a.m. Today1:05 a.m. July 13, 2010
"Lazy Portfolios at 10: A winning decade http://on.mktw.net/b9hnoj" 11:39 p.m. EDT, July 12, 2010 from MKTWFarrell
"Conspiracy of Weasels is killing real reform http://on.mktw.net/9lbCWM" 11:49 p.m. EDT, July 5, 2010 from MKTWFarrell
"Don't sit like a monk! Beat stress like a jock http://on.mktw.net/9xIjY7" 11:45 p.m. EDT, June 28, 2010 from MKTWFarrell
"An Invisible Gorilla is killing America's soul http://on.mktw.net/dgoRdz" 11:27 p.m. EDT, June 21, 2010 from MKTWFarrell
"Doomsday Capitalism virus is spreading http://on.mktw.net/d8AeFm" 12:30 a.m. EDT, June 15, 2010 from MKTWFarrell
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