Beware this 'behavioral finance' trap; 20-year performance of the S&P 500 by decade; Golden Heaven shares plummeted 89% yesterday; Retail gas prices at lowest level of the year; Inflation has fallen across the globe; A travel tip
1) Ben Carlson's recent post on his A Wealth of Common Sense blog, How The Market Shapes Your Portfolio, has this interesting chart from The Economist:
I had to study it for a while to make sense of it...
The chart shows that, across millions of Vanguard's retail investors' accounts, the amount they have in stocks ranges between 64% to 86%, depending on the year they opened their account.
Had you asked me to predict what the data would show, I would have guessed the people who invested when markets were at peaks (which were in most cases followed by big declines) would, having been burned, have a lower percentage allocated to equities than people who invested at bottoms and therefore profited by the big run-ups that followed.
For example, I would have expected that those who invested in the 1980s and 1990s and benefited from the long bull market through early 2000 would have more in stocks today than those who opened their accounts at the peak in 1999 or 2000, and whose early experience was getting hammered by the immediate, severe decline from March 2000 through October 2002.
But in fact, just the opposite was the case!
Why? Carlson hypothesizes that:
Maybe it's inertia but it's obvious stock market returns in your formative years as an investor can have an impact on how you invest.
What's the lesson for you?
Don't fall into this "behavioral finance" trap – one of dozens of ways that investors can let emotions interfere with sound investment decision-making.
Many factors should influence what percentage of your assets should be invested in stocks – your age, income, overall financial situation, what big expenses you might have in the near future (paying for college, buying a house, etc.), your view of what the markets are likely to do, etc.
But the market conditions that existed when you first started investing many years ago shouldn't be one of them!
2) I thought the charts below – also from Carlson's blog post – that show the 20-year performance of the S&P 500 Index by decade (in two different ways) were interesting...
Carlson calculated the growth of $1 invested in the index over a 20-year period at the start of each decade, going back to the 1930s:
I wouldn't have guessed that the subsequent 20 years from 2000 would have been the very worst 20-year period in more than half a century (only 1930 through the 1940s was worse).
3) A hat tip to activist short seller Nate Anderson of Hindenburg Research, who can add yet another notch to his belt as shares of Chinese amusement-park operator Golden Heaven (GDHG) collapsed by 89% yesterday:
It was less than a month ago on November 13 that Hindenburg posted this thread that clearly exposes Golden Heaven as a total fraud:
How does the U.S. Securities and Exchange Commission ("SEC") allow frauds like this – especially ones from China, where there's such a long, sordid history – to go public in our markets, on the Nasdaq no less? U.S. investors lost nearly $1 billion yesterday!
This is yet another case study on why investors are well served to pay attention to activist short sellers. They're not always right, but the well-known ones are certainly worth listening to...
4) Here's an interesting data point on inflation, which I have long believed would stabilize in the 3% to 4% range, but could go lower:
5) It's not just in the U.S. – inflation has fallen sharply across the globe:
6) Here's a good travel tip...
I bought this cushion in August to sit on at the U.S. Open tennis tournament because my rear end would get sore after sitting all day on the hard seats:
When deflated, it's light and compact:
I now take it with me whenever I travel for greater comfort on long plane, train, or car rides... I highly recommend it!
Best regards,
Whitney
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