COTW: How Your Starting Point Impacts Forward Returns

January 6, 2020

Fidelity's recent audit of its 30 million retirement accounts revealed that nearly 40% of its clients were over-allocated to equities relative to what would be recommended by most advisors for their current phase of life. In addition, 8% of retirement accounts had 100% in equities. Without knowing the details of each account holder's personal situation, it is impossible to know just how far out of line those allocations are, but 100% in equities leaves little room for error and only makes sense in very few situations.

 

The chart below illustrates how long-term forward returns are impacted by select starting points, like the end of a bear market or the peak of a rally. We hope the 100%-in-equities crowd have anchored themselves on a number closer to the 5.9% annualized return stocks have delivered over the last 20 years rather than the 18.5% they have gifted us all over the last 10.

 

The chart below can be downloaded here.

 

IMPORTANT DISCLOSURES

SpringTide Partners, LLC is a Registered Investment Advisor with the state of Illinois and other states jurisdictions where required. Registration with the SEC or any state securities authority does not imply a certain level of skill or training. All information contained herein is for informational purposes only and does not constitute a solicitation or offer to sell securities or investment advisory services. All investing carries risk including risk of principal loss. All statements made on this website are opinions of SpringTide Partners, LLC and are subject to change. SpringTide Partners, LLC assumes no responsibility for the accuracy of the data included. Statements made on website shall not constitute investment advice.

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