Newspaper article Sarasota Herald Tribune

U.S. Stocks Were the Place

Newspaper article Sarasota Herald Tribune

U.S. Stocks Were the Place

Article excerpt

to put your money in 2013

INVESTORS IN THE U.S. AND OVERseas rang in the New Year with reason to be ecstatic. The U.S. market was ahead 33 percent, based on the Wilshire 5000 Index, and the rest of the world was ahead by 15.3 percent, based on broad-based total international indexes. Investors who chose U.S. government securities, however, had negative returns.

We illustrate how these results affected investors by reviewing how four representative investors' portfolios of $100,000 performed. These investors' portfolios are representative of many investors' portfolios.

The data for the period Jan. 1, 2013, to Dec. 31, 2013, is:

The Wilshire 5000 Index returned 33 percent.

The Nasdaq Composite returned 40.1 percent.

Intermediate U.S. government securities returned -2.6 percent.

Alan is our aggressive speculator. He believes that, since he is young and has time to recover from losses, his money belongs in stocks, and the ones that can give him the largest gains. Alan invested his all-stock portfolio in aggressive Nasdaq stocks. To approximate his portfolio's performance we use the Nasdaq Composite Index. The preceding data show his Jan. 1, 2013, $100,000 portfolio has risen to $140,100.

Betty is more cautious but still an aggressive investor. She also believed stocks were her best alternative. But she was not comfortable with a portfolio concentrated in "speculative" stocks. She invested her all-stock portfolio to achieve broad market diversification. We use the Wilshire 5000 Index to approximate her results. Her $100,000 portfolio is now worth $133,000.

Carl is our moderate investor. He wants broad stock exposure but felt it was good to hedge his bets with some bonds to reduce his risk and generate some cash to dampen volatility. He allocated his portfolio to 60 percent diversified stocks and 40 percent intermediate government securities. His portfolio has risen to $118,760.

Dorothy is our moderately conservative investor. She knows that, in the long-term, stocks will likely outperform bonds. But she has bills to pay, and is concerned stocks might be depressed when she needs to pay them. She allocated her portfolio to 40 percent diversified stocks and 60 percent intermediate government securities. …

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