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Tuesday, December 18, 2012

While You Might Not Have Been Looking....

The US stock market is certainly closing on a great year. + 16,3 %for the SP 500 (ETF SPY) and +16.4% for the US total market (VTI)
But while you might not have been looking emerging markets (etf EEM) have just about caught up. They are up 16.1% ytd.
The biggest surprise for some is the   gain for German stocks +30.7.

Growth of $100,000 top chart, Total Return and Volatility Below  YTD Also included is AGG the total bond market index etf.

Long term stock market forecasts (unreliable as they are) seem to range from the +5% to +7%. That means that if returns revert to the long term mean forecasts, missing this years 16% + returns will mean a big hit to the long term returns on investors.....

And it seems that many investors did exactly that moving money out of stocks and into bonds. An anecdotal example of investment behavior is here .

Numbers on the flows from Lipper are here. Reflecting the trend seen all through 2012, during November 2012 investors added $25.7 billion into bond funds and $69.6 billion into money market funds while they pulled a net $14.4 billion out of stock funds.

Individual investors are notorious for performance chasing and market timing rather than sticking to a long term asset allocation, It seems investors had their eyes firmly directed into the rearview mirror making their allocation for 2012 based on the 2011 results: +1.9% for the SP 500 (SPY) and + 7.7% for the Aggregate bond index (AGG) and emerging markets -18.8%. Growth of $100,000 and return volatility below.

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