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I’ll Take 12%
By admin

"It could take as long as five years for asset managers around the world to recoup the $10 trillion they lost in 2008 at the height of the financial crisis, according to a new report by Boston-based research firm Cerulli.

It took the industry three years to generate more than $10 trillion between 2005 and 2008, and only six months to lose it all, the Cerulli Quantitative Update: Global Markets 2009 report says."

So begins an item in a July 9, 2009 online bulletin from Financial Planning Magazine.

Sounds gloomy, doesn't it?  But why would anyone be disappointed if it takes five years for the S&P 500 to reach its previous high?

Here are the numbers:  The S&P 500 Index closed today, July 9, 2009 at 882.68. The highest closing value of the S&P 500 Index was 1552.58, which occurred on October 9, 2007.

If in fact it takes the S&P 500 five years to climb its way back to its all-time high, it will have to average 12% per year compounded total return during that time.*

That's not a bad rate of return. I would take that without complaint.

*Dividends have not been included in the calculation; neither have investment expenses – we're trying to keep this simple.

R. Kevin O'Keefe, CIMA, AIF
Chief Investment Officer
kevinok@firstaffirmative.com

Posted: July 10, 2009