Bear Market – an 18-to-24 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex. — Investor’s Glossary
October 9, 2008 marked the one-year anniversary of the bear market in U.S. equities. This seemed like a good occasion to review the performance of all the portfolios presented in Ben Stein’s and my book, Yes, You Can Supercharge Your Portfolio. The book was published in December 2007 and the portfolios it contains were devised in sunnier times, during the preceding summer. Our goal was to popularize Modern Portfolio Theory among retail investors, and we relied heavily on Geoff Considine’s Quantext Monte Carlo simulator [QPP]. Had we known the stock market would decline almost 50% after constructing the didactic portfolios in the book, we would have titled it Yes, You Can Put Brakes On Your Portfolio’s Descent into Hell.
Here follows a performance update on the portfolios discussed in the book over the market’s decline this past year.
We called our initial portfolio the “Apple Pie” portfolio [70 percent total U.S. Stock Market (VTSMX), 25 percent MSCI EAFE Index (FSIIX), and 5 percent MSCI Emerging Markets Index (VEIEX)] because it looked like the sort of standard pie-chart portfolio recommended to expense-conscious, indexing investors.