I serve on the Endowment Committee of a local not-for-profit organization, and this morning we had our annual review from the Investment Manager of the portfolio (not me).  I’m sure it was quite daunting to sit in front of 10 other people and explain the horrible performance and market environment we are in, but he did a nice job.  He’s from out of town, so he doesn’t know that I, too, am a portfolio manager, but I took it easy on him:)

He reminded me though of something I had read a few months ago, but I had forgotten about it and thought that you, gentle reader, should know.  A lot of times, you’ll hear about the rolling 10 year average for the market.  Since the dawn of time, very few of these rolling 10 year averages have been negative, only 6 since 1900.  Most of the time, if you can stay invested for 10 or more years in the market, you’ll most likely have made money.  In early 2009, you began to hear about ‘the lost decade’, meaning that we were at the same level as we were 10 years ago.  Well, at the end of this year, we’re set up for another disappointing 10 year rolling average as we know that the Dow in 1999 produced a return of 25.2%.  Well, at the end of this year, that return ‘rolls off’, making it quite hard to produce a compelling story of the new rolling 10 year average.  My rough calculations show that the Dow would have to produce a 13% return in 2009 just for the rolling 10 year period to break even.  A lot can happen the rest of 2009, but note that as of now, the Dow is down over -9% YTD.

All this to say, consider yourself warned.  If it happens that the Dow doesn’t return over 13% in 2009, the media will have a heyday with this news and it will most likely cause investors to become anxious again.  You need not be one of those because you heard my warning clear back in April:)

While it may make for interesting investment banter, we’re not interested in 10 year rolling averages, and neither should you be.  Instead, be interested in prudent investment choices that protect and increase your wealth.  We strive to that end, and you should do the same.  Ignore the noise, stay the course.


Sources: www.seekingalpha.com, www.wsjonline.com