Is your portfolio primed to underperform?

Is your portfolio primed to underperform?

If you own an S&P 500 index fund, or a basket of growth stocks that have performed mightily over the past five years, it is possible that those stocks can generate a return of zero for a very long time. As in 10 years or longer.

Actually, it is less than zero. For the 10-year period ending 2008, the S&P 500 index generated a cumulative negative return of -12.99%.

I am not predicting it, but it is possible because it has happened in the past.

Now, let’s “take a look” into the future.

Take a look at Vanguard’s ten-year, annualized, nominal projections in the various dimensions of global markets – especially including the expected dismal returns of Large-Cap U.S. Stocks.Now take a look at your portfolio. Is it time to broaden your basket of stocks to include value and small stocks, in both domestic and international markets?

Don’t put all your eggs in one basket. No one knows what the future holds. That is what diversification is all about.

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