It would be nice to have the market as hot as it was in here in Phoenix yesterday.  You would think that after living here for twenty-seven years, I would be used to the heat.  But, after walking through a parking lot to my car yesterday around 4pm, I was expecting someone to throw butter and sour cream on me as I felt like a baked potato.  Yesterday’s 115 degree temperature was the hottest June 21st since 1968.  So, what was life like forty years ago on June 21st when someone else was saying, “why do I live in a desert?”

Ready for this?  Gallon of Gas:  $.34

So how does the all the above relate to the current financial markets?  Let’s hope not a lot.  The last ten years of the stock market has seen the S&P 500 Index provide a very modest annual return of just above 3%.  We have seen longer periods of time where the market pretty much went nowhere.  Again, going back forty years to 1968, we saw a market drift sideways for fourteen years!  The current market environment has not lasted nearly as long, but, begs the question, how do you invest in this type of market?  The answer:  Diversify.

Though the 500 largest companies have returned only a modest annual average of around 3% over the last ten years, bonds and foreign equities each grew over 7% annually.  Real estate investment trusts saw an average return of over 10% annually.  Over the last ten years a diversified portfolio performed at twice the average of the S&P 500.  No one knows for sure which asset class will be the best performer in the future, just as no one can predict when a bull market will begin.  One thing that we do know is that history has shown us the worst thing one can do is try and time the market.

Looking at a $1,000 investment made in the S&P 500 Index in 1995, and left untouched until 2007, could have grown to $2,637. But missing only the top twenty months in that 120-month span could have cut your investment to only $683.  Remember, it’s not the timing of the market that works, but the time “in” the market, and “in” a diversified portfolio that will work.

Darren Whitehurst, SW Office