November was one of the best months for a diversified asset class portfolio in decades. The table below shows the six best monthly returns for a diversified asset class portfolio going back to 1995. November’s +15.7% return for the “Asset Class Mix” was the 2nd best monthly return since 1995.
|Date||*Asset Class Mix||S&P 500 Index||DFA U.S.
Equius clients can take some important lessons from November’s strong performance:
- The best overall returns come during periods of maximum uncertainty. The highest monthly return for the Asset Class Mix in over 25 years came in April of 2009, immediately after the stock market bottomed from the real estate crisis in 2008 (and months before the economy began to turn around). The 3rd best month was earlier this year, in April, immediately after the government announced nationwide lockdowns. In November, we saw the most contentious and talked-about election in recent memory and many investors wondered if they should sell all or a portion of their stock portfolios and wait for the political environment to settle down. Acting on that urge, which we didn’t allow anyone to do (nor did we allow anyone to bail out in March), would have been disastrous — missing out on a +15.7% gain (or $157k per $1 million invested) would have cost you almost 1.6% per year in returns over the next decade! The most important time to stay committed to your portfolio is when things seem most uncertain, because we are often on the cusp of a surprisingly good recovery.
- Don’t count out parts of your portfolio that haven’t been doing well lately. Investors who have been frustrated by lackluster returns from value, small cap, and international stocks in recent years will be comforted by the results in November. While US large growth stocks did well — the S&P 500 gained +11%, US and international large and small value stocks all did much better. Of note, US small cap value also had its second-best month in over 25 years, gaining +17.9%. International large value stocks did even better, gaining +19.2%. This is why rebalancing is essential to long-term success, you have to maintain consistent exposure to your core investments so that when they surge, you receive the full amount of the returns you deserve.
It’s comforting to see in such an extraordinary year that core investment principles continue to work — having an investment plan that is appropriate for your long-term goals, staying committed to that plan even when short-term results are disappointing, and rebalancing periodically to make sure your portfolio doesn’t become too lopsided and risky. And once again, we are reminded that the key to successful investing is extreme patience and discipline.
*Asset Class Mix = 21% S&P 500 Index, 21% DFA US Large Value Fund, 28% DFA US Small Value Fund, 18% DFA Int’l Value Fund, 12% DFA Int’l Small Value Fund, rebalanced annually.
Written in collaboration with Eric Nelson, Servo Wealth Management.
Equius Partners, Inc. is a Registered Investment Advisor.
Past performance is not a guarantee of future results. The data and information set forth herein are provided for educational purposes only and should not be considered tax, legal or investment advice; a solicitation to buy or sell securities; or an opinion on specific situations – as individual circumstances vary. There is no guarantee an investing strategy will be successful. Investing involves risks, including possible loss of principal. Diversification does not eliminate risk, including the risk of market or systemic loss.
Please consider the investment objectives, risks, and charges and expenses of any mutual fund and read the prospectus carefully before investing. Indexes are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
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