Fintech executive, writer, math geek, and investment systems developer. Founder and CEO of Altruist and Founder of FormulaFolios.

11 Years of No Gains but Lots of Volatility

Thought I'd add this to the blog since it's timely. On November 30 the S&P 500 went up more than 3%.  That was the 11th time we had a move of 3% or more this year (either up or down).  If you've ever wondered if this type of volatility is normal - the short answer is no.  But to illustrate it better I put together this chart showing how rare it was prior to the year 2000, and how regular it has become since then.  Below shows the number of times the market has moved 3%+ either up or down for each decade since 1950:

Sadly on January 1, 2000 the S&P 500 was at 1,469 and today (December 1, 2011) it stands at 1,244.  A net loss (including dividends) of 15.4%.  So while volatility has picked up substantially returns have not.

Truthfully - there is no benefit we can derive from this data.  All it tells us is that stock investors have not been rewarded for quite some time even though the stress associated with stock investing has picked up measurably.  For me it also suggests that investors need to take a different approach for times like this than what they could have used the 50+ years prior.  My opinion is that tactical approaches (like I shared here) are the way to go to best manage volatility, keep a level head, and profit in times of low total return and the very high volatility buy/hold investing has become.

Over the weekend I'll be updating a new monthly feature of the blog on Tactical Asset Allocation.  Til' then - have a great night and don't let the volatility spook you too much.

Jason

Market Update - November 5, 2011

So What will the Market do in December?