An Excellent Last 12 Months for Investors

The past 12 months ending February 13, 2017 have been particularly good for our investors, the aggregate return being +17.34%.

The calculation used to determine our clients’ aggregate return is called the internal rate of return. It is cash flow specific, and is net of all fees and expenses. It represents the average return experienced by our investors during the period.

Shown below are the returns for the same period of several representative assets which are included in most of our client accounts. The calculations for these asset returns are not cash flow specific. They represent the return of the fund, not necessarily the investor.


NameTicker12 Mo Return
SPDR® S&P Global Natural Resources ETFGNR44.12
Schwab Emerging Markets Equity ETF™SCHE32.31
Schwab US Large-Cap ETF™SCHX25.13
Schwab International Equity ETF™SCHF18.89
Schwab US REIT ETF™SCHH16.15
Vanguard Health Care ETFVHT14.41
Schwab US TIPS ETF™SCHP 2.56
Schwab Short-Term US Treasury ETF™SCHO -0.67
Schwab Intermediate-Term US Trs ETF™SCHR -2.88
Investment return information is provided by Morningstar using GIPS standards.

So, what rate of return should an investor expect? And, what can an investor do to increase her return? Read the Wall Street Journal? Barron’s? Watch CNBC? Look for insider information? There is quite a bit of evidence to support the idea that none of these, with the possible exception of the insider information will lead to superior investment results. Many decades ago it may have been possible for someone with keen insight to search the financial pages for clues that could lead to undiscovered investment jewels. In today’s world that becomes less and less likely.

One reason is that the “competition” is not just the neighbor with some extra bucks to invest, or even some Harvard PhD with specialized knowledge in the realm of finance and economics and access to lots of information. No, today the competition is more likely to be a computer program developed by a team of Harvard PhD’s with specialized knowledge in finance and economics and computer science, and LOTS AND LOTS of information. Witness a recent bit of news published in the MIT Technology Review.

So, what can we do to increase our returns? We can minimize costs, for example by using ETFs with very low operating expenses. And, we can understand the relevant history and the current situation in order to develop a good strategy and avoid making costly errors in judgement. Doing these things well can greatly increase our returns.

And, what rate of return should we expect? In my experience, most investors should expect a return of between two and four times the rate of inflation over time, depending on their allocation among multiple asset categories, which should be determined based on their specific tolerance for risk, which should be based on their particular circumstances.













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