Review & Outlook

Our take on the investing, financial, & economic themes of the day

The Benefits of Staying the Course through 2008-2009

At O’Brien Greene we don’t try to time the market.  Generally speaking, we stay fully invested, although the asset allocations of our portfolios may shift when broader market conditions warrant.  Here’s an interesting chart from a recent Fidelity presentation making the case for U.S. equities, and the chart shows the benefits of “staying the course” through the financial crisis.  It compares the fortunes of three different moves investors could have made on 9/30/08, when Lehman Brothers went bankrupt: (1) stay the course with a 60/40 stock/bond portfolio; (2) move completely to cash; (3) move completely to U.S. Treasuries.

stay the course

If you had gone to cash on 9/30/08 there would have been plenty of reasons to stay there.  The bull market since 2008 has been unloved by investors.  Nevertheless, as you can see, staying the course has now resulted in significant outperformance compared to both cash and Treasuries.

Chart Key: U.S. equity = Russell 3000 Index; Non-U.S. equity = MSCI AC World ex-U.S. Index; U.S. bonds = Barclays Aggregate Bond Index; Treasuries = Barclays Treasury Index; Cash = Barclays 1–3 Month T-bill Index. Index returns represent past performance and are not a guarantee of future performance. See Important Information for additional information. 60/40: 40% Russell 3000 Index, 20% Russell Global Equity Index/40% Barclays Aggregate Index. It is not possible to invest directly in an index. All market indices are unmanaged. Source: FactSet, Fidelity Investments