How does the historic rate of return for Life Settlements compare to the rate of return for the stock market or mutual funds?
Ans. No doubt about it: The above question is the most often-asked in further ask questions. The return on any investment in stocks or mutual funds can vary greatly depending upon many different factors. Keep in mind that no one can precisely predict any return you might receive from investing in the stock market, whether through individual stocks or through a mutual fund. Also, the past performance of LSs is not a guarantee of future returns. And, of course, none of us at Life Settlements for Profit, we are competent to give an informed answer. But we have done some research and gathered some recent articles featuring well-known investment experts regarding their outlook on the stock market and mutual funds. Here goes:
The Stock Market.
1. Bernard Baruch (1870-1965), who made a fortune in the stock market said, “The main purpose of the stock market is to make fools of as many men as possible.” James A. Shepherd in his October 15, 2005 newsletter (The Shepherd Investment Strategist), points out that the above quotation “Is one of many humorous truisms coined by the famous stock market investor.” He also points out that, “The NASDAQ is still (in spite of a recent rally) down almost 60% from its high.” Shepherd, one of the most respected investment strategists in the country, concludes his January 12, 2007 newsletter saying, “…does it make any sense to be invested in stocks right now…No, I certainly don’t think so.” Want to learn more about Shepherd’s view of what the future bears for the stock market?…Go to http://www.jasmts.com/.
2. The Dallas Morning News (October 26, 2005 issue) carried an article with this title: “The new math of stock returns” by Will Deener.
Sit down before you read the following quotes from the article:Listen to a stockbroker or financial planner hawk their services and you will almost certainly hear words to this effect: You can expect the stock market to return an average of 10 percent a year over the long term. That statistic is trotted out with such assurance that most investors accept it as financial gospel. But can investors who start buying stocks today actually expect that kind of return over the next 10, 20 and 30 years? “From 2005, guess the length of time that is needed to assure the long-term average,” said Ed Easterling, president of Crestmont Research, a Dallas investment research firm. “The answer - probably never.”
Mr. Easterling is not alone in his effort to lower investor expectations. An increasing number of academics and financial experts believe market returns over the next few decades won’t match previous decades. A more realistic return - or, as Mr. Easterling puts it, a return that a rational investor can expect - is somewhere between 6 percent and 7 percent. The respected Leuthold Group, a Minneapolis research firm, also estimates long-term market returns in that range.
“It’s unreasonable for investors to expect double-digit returns,” said Eric Bjorgen, senior research analyst at Leuthold. “Too many investors join their expectations to what happened in the last 20 years, but that’s not likely to happen again in our lifetime.” A look back at stock market history will show why. The average compounded annual return of the Standard & Poor’s 500 index from 1926 to 2004 is 10.4 percent, according to Ibbotson Associates Inc., a Chicago research firm. …” it’s reasonable to assume that investors won’t get the… returns that they got in the past.”
And that takes the average annual market return down to Mr. Easterling’s estimate of 6.2 percent.
(Underlining Ours)
Other models predict a slightly higher return, but the point is that investors should be realistic about their market expectations. “If investors believe they are going to get 10 percent returns, they have to believe that we are going to have another bubble,” Mr. Easterling said. “And if history is any guide, it may be another 70 years before we see another bubble.”
3. Howard Ruff, in his December 2006 newsletter, The Ruff Times, says, “Will the stock market go lower? The odds say yes. In fact the odds say that the current bear market will not be over until the Dow is down around 4000."
In Ruff’s January 2007 newsletter he says, “The year 2006 gives us a concrete example of how stupid and biased Wall Street can be. They are all thrilled to death with the alleged profits over the year in the stock market because the Dow has risen as much as 20% in some instances. But they are ignoring the fact that Nasdaq, which is much bigger than the New York Stock Exchange, has gone virtually nowhere. You remember when Nasdaq peaked in the year 2000 at over 5,000? Well, it is now around 2,500; I don’t call that a very profitable turn on your money.”
Howard Ruff has correctly called every turn in the market for the past 25 years.
4. Jim Shepard (an investment guru who has the knack of making high profits for his followers when the market changes directions) writes a monthly newsletter titled “The Shepard Investment Strategist.” In his December 26, 2006 issue he writes,
“A Recession is Lurking! ------ The above chart [shows an inverted yield curve, which means short-term interest rates are higher than long-term rates] clearly points out how risky the current economic environment really is. I cannot emphasize enough just how accurate a predictor of recession the inverted yield curve is. Later on in this piece, I will demonstrate why I believe corporate earnings will deteriorate so dramatically as a result of this unfolding recession, and how that has always caused stocks to tumble (and will this time as well).”
A SUGGESTIONJim Powell, one of the most respected investment newsletter authors, writes in his January 2007 issue of “Global Changes Opportunities Report,” (the following quote):
“The four threats I discussed this month – social and political breakdowns in the U.S., a bigger and more perilous Middle East war, the global credit bubble, and a possible stock market emergency – are extremely dangerous. However, you can greatly limit your exposure to the threats if you:” (Here comes the suggestion)
“Take some of you stock profits off the table and put stop- losses on everything else.”
“If at all possible, please urge other people you care about to do the same.”
Mutual Funds
Mutual funds are touted to have two specific advantages: diversification and professional management. Do these advantages overcome the disadvantages?… Let’s see what the experts say:
1. Jane Bryant Quinn in her Newsweek article (August 25, 2005 issue) titled, “Down With Mutual Funds?” said:
"DAVID SWENSEN IS MAD AT MUTUAL FUNDS, and I don’t mean just a little sore. They’re greedy, he says. They abuse investors. They milk you for fees. Their ads manipulate past performance to get you to buy. You’re not only getting rolled, you’re getting lousy investment results.
Who is David Swensen and why should you pay attention to him? He’s one of the most successful money managers in America today. In 20 years of running Yale University’s endowment, he has outdone his peers, by far. His returns have averaged 16.1 percent a year.
… he [Swensen] started examining the investments people commonly use - and that’s when his anger rose. He found poor quality and high fees, especially among mutual funds.
Swensen’s outrage focuses primarily on costs. Mutual funds run by managers tend to charge high fees. Funds sold by stockbrokers charge even more… The median cost to investors in 2002 came to 2.35 percent - and that doesn’t count the upfront commission a broker might charge."
High costs chew up your investment returns.
As if the high cost of most mutual funds weren’t bad enough, investors often sandbag themselves. You do it by chasing top performers, imagining that they’ll do as well in the future as they did in the past. As you may have learned already, that’s a bad idea.
2. Dr. Mark Skousen (professional economist, author of over 20 books, college professor, and editor of the Investment U e-Letter) in a mailing piece, explaining hedge funds said this about mutual funds:
“And here’s another big difference. Hedge funds go after high absolute returns. Mutual funds, on the other hand, seek high relative returns.
The difference is crucial. And it explains why the average investor often feels like his mutual funds are moving in slow motion. For example, if the stock market drops 20% one year and your mutual fund falls only 15%, the fund company will often boast of their high “relative returns.”
But all they really have is… a lot of nerve. If you invested $100,000 in such a fund, you’ve now lost $15,000. Yet while you’re licking your wounds, the fund company is sending the manager a big bonus and a bouquet of roses for “beating the market.”
Billionaires and other wealthy hedge fund shareholders will stand for none of this nonsense.”
Dr. Skousen is always an interesting, sound and professional investment authority. To learn more visit his “Investment U” website: http://www.mskousen.com/.
Ans. No doubt about it: The above question is the most often-asked in further ask questions. The return on any investment in stocks or mutual funds can vary greatly depending upon many different factors. Keep in mind that no one can precisely predict any return you might receive from investing in the stock market, whether through individual stocks or through a mutual fund. Also, the past performance of LSs is not a guarantee of future returns. And, of course, none of us at Life Settlements for Profit, we are competent to give an informed answer. But we have done some research and gathered some recent articles featuring well-known investment experts regarding their outlook on the stock market and mutual funds. Here goes:
The Stock Market.
1. Bernard Baruch (1870-1965), who made a fortune in the stock market said, “The main purpose of the stock market is to make fools of as many men as possible.” James A. Shepherd in his October 15, 2005 newsletter (The Shepherd Investment Strategist), points out that the above quotation “Is one of many humorous truisms coined by the famous stock market investor.” He also points out that, “The NASDAQ is still (in spite of a recent rally) down almost 60% from its high.” Shepherd, one of the most respected investment strategists in the country, concludes his January 12, 2007 newsletter saying, “…does it make any sense to be invested in stocks right now…No, I certainly don’t think so.” Want to learn more about Shepherd’s view of what the future bears for the stock market?…Go to http://www.jasmts.com/.
2. The Dallas Morning News (October 26, 2005 issue) carried an article with this title: “The new math of stock returns” by Will Deener.
Sit down before you read the following quotes from the article:Listen to a stockbroker or financial planner hawk their services and you will almost certainly hear words to this effect: You can expect the stock market to return an average of 10 percent a year over the long term. That statistic is trotted out with such assurance that most investors accept it as financial gospel. But can investors who start buying stocks today actually expect that kind of return over the next 10, 20 and 30 years? “From 2005, guess the length of time that is needed to assure the long-term average,” said Ed Easterling, president of Crestmont Research, a Dallas investment research firm. “The answer - probably never.”
Mr. Easterling is not alone in his effort to lower investor expectations. An increasing number of academics and financial experts believe market returns over the next few decades won’t match previous decades. A more realistic return - or, as Mr. Easterling puts it, a return that a rational investor can expect - is somewhere between 6 percent and 7 percent. The respected Leuthold Group, a Minneapolis research firm, also estimates long-term market returns in that range.
“It’s unreasonable for investors to expect double-digit returns,” said Eric Bjorgen, senior research analyst at Leuthold. “Too many investors join their expectations to what happened in the last 20 years, but that’s not likely to happen again in our lifetime.” A look back at stock market history will show why. The average compounded annual return of the Standard & Poor’s 500 index from 1926 to 2004 is 10.4 percent, according to Ibbotson Associates Inc., a Chicago research firm. …” it’s reasonable to assume that investors won’t get the… returns that they got in the past.”
And that takes the average annual market return down to Mr. Easterling’s estimate of 6.2 percent.
(Underlining Ours)
Other models predict a slightly higher return, but the point is that investors should be realistic about their market expectations. “If investors believe they are going to get 10 percent returns, they have to believe that we are going to have another bubble,” Mr. Easterling said. “And if history is any guide, it may be another 70 years before we see another bubble.”
3. Howard Ruff, in his December 2006 newsletter, The Ruff Times, says, “Will the stock market go lower? The odds say yes. In fact the odds say that the current bear market will not be over until the Dow is down around 4000."
In Ruff’s January 2007 newsletter he says, “The year 2006 gives us a concrete example of how stupid and biased Wall Street can be. They are all thrilled to death with the alleged profits over the year in the stock market because the Dow has risen as much as 20% in some instances. But they are ignoring the fact that Nasdaq, which is much bigger than the New York Stock Exchange, has gone virtually nowhere. You remember when Nasdaq peaked in the year 2000 at over 5,000? Well, it is now around 2,500; I don’t call that a very profitable turn on your money.”
Howard Ruff has correctly called every turn in the market for the past 25 years.
4. Jim Shepard (an investment guru who has the knack of making high profits for his followers when the market changes directions) writes a monthly newsletter titled “The Shepard Investment Strategist.” In his December 26, 2006 issue he writes,
“A Recession is Lurking! ------ The above chart [shows an inverted yield curve, which means short-term interest rates are higher than long-term rates] clearly points out how risky the current economic environment really is. I cannot emphasize enough just how accurate a predictor of recession the inverted yield curve is. Later on in this piece, I will demonstrate why I believe corporate earnings will deteriorate so dramatically as a result of this unfolding recession, and how that has always caused stocks to tumble (and will this time as well).”
A SUGGESTIONJim Powell, one of the most respected investment newsletter authors, writes in his January 2007 issue of “Global Changes Opportunities Report,” (the following quote):
“The four threats I discussed this month – social and political breakdowns in the U.S., a bigger and more perilous Middle East war, the global credit bubble, and a possible stock market emergency – are extremely dangerous. However, you can greatly limit your exposure to the threats if you:” (Here comes the suggestion)
“Take some of you stock profits off the table and put stop- losses on everything else.”
“If at all possible, please urge other people you care about to do the same.”
Mutual Funds
Mutual funds are touted to have two specific advantages: diversification and professional management. Do these advantages overcome the disadvantages?… Let’s see what the experts say:
1. Jane Bryant Quinn in her Newsweek article (August 25, 2005 issue) titled, “Down With Mutual Funds?” said:
"DAVID SWENSEN IS MAD AT MUTUAL FUNDS, and I don’t mean just a little sore. They’re greedy, he says. They abuse investors. They milk you for fees. Their ads manipulate past performance to get you to buy. You’re not only getting rolled, you’re getting lousy investment results.
Who is David Swensen and why should you pay attention to him? He’s one of the most successful money managers in America today. In 20 years of running Yale University’s endowment, he has outdone his peers, by far. His returns have averaged 16.1 percent a year.
… he [Swensen] started examining the investments people commonly use - and that’s when his anger rose. He found poor quality and high fees, especially among mutual funds.
Swensen’s outrage focuses primarily on costs. Mutual funds run by managers tend to charge high fees. Funds sold by stockbrokers charge even more… The median cost to investors in 2002 came to 2.35 percent - and that doesn’t count the upfront commission a broker might charge."
High costs chew up your investment returns.
As if the high cost of most mutual funds weren’t bad enough, investors often sandbag themselves. You do it by chasing top performers, imagining that they’ll do as well in the future as they did in the past. As you may have learned already, that’s a bad idea.
2. Dr. Mark Skousen (professional economist, author of over 20 books, college professor, and editor of the Investment U e-Letter) in a mailing piece, explaining hedge funds said this about mutual funds:
“And here’s another big difference. Hedge funds go after high absolute returns. Mutual funds, on the other hand, seek high relative returns.
The difference is crucial. And it explains why the average investor often feels like his mutual funds are moving in slow motion. For example, if the stock market drops 20% one year and your mutual fund falls only 15%, the fund company will often boast of their high “relative returns.”
But all they really have is… a lot of nerve. If you invested $100,000 in such a fund, you’ve now lost $15,000. Yet while you’re licking your wounds, the fund company is sending the manager a big bonus and a bouquet of roses for “beating the market.”
Billionaires and other wealthy hedge fund shareholders will stand for none of this nonsense.”
Dr. Skousen is always an interesting, sound and professional investment authority. To learn more visit his “Investment U” website: http://www.mskousen.com/.
0 Response to "Stock Market & Mutual Fund are getting lousier?"