10 (or more) Things You Should Know

  1. The top performing stock asset classes so far during 2016 are Emerging Markets, up 17-20%, and Real Estate (US and International), up 13-15%, while the S&P 500 is up nearly 8%.
  2. In the US, small and value asset classes are outperforming the S&P 500 for 2016 (Note: we recommend investing in a globally diversified portfolio of asset classes, not just in the S&P 500).
  3. The Brexit vote in the UK was on June 23, 2016. The results were announced on Friday, June 24 and worldwide stock markets plummeted in the following days. Since July 1, 2016, most broadly diversified international asset classes (which do not hold US based companies) have outperformed US based asset classes.
  4. It is incredibly difficult for active money managers to consistently outperform their benchmarks and their peers. In a recently issued report**, out of 641 US equity funds that were in the top 25% as of March 2014, only 7.3% of these funds remained in the top 25% as of March, 2016.
  5. In the same report, only .78% of US large-company funds and no mid-cap and no small company funds were able to remain in the top 25% of performing funds over five consecutive one year periods ending in March, 2016.
  6. US individual income tax rates have changed dramatically over decades, but not as significantly in recent years.
    1. In 1980, the top tax rate was 70% for taxable income above $215,400 (all data for married filing jointly) and there were 16 different tax brackets.
    2. After major tax reform in 1986, the top tax rate in 1987 was 38.5% for taxable income over $90,000 and there were 5 tax brackets.
    3. The top US income tax rate for married couples is now 39.6%, for taxable income above $466,950 and there are 7 tax brackets.
    4. The top rate has not changed since 2013, when it was increased from 35% in 2012 for taxable income over $388,350.
  7. The S&P 500 has grown significantly over decades, as the following figures show. You need to remain invested and be patient to benefit from the growth which stocks can and do provide, both in the US and internationally.
    1. January 1, 1980:        111
    2. January 1, 1990:       340
    3. January 1, 2000:    1,426
    4. January 1, 2010:    1,124
    5. August 24, 2016:   2,175 
  8. Social Security benefits for 2017 may increase very slightly. However, for most recipients, their net monthly check will likely decline, due to increases in the Medicare premiums which are deducted from their Social Security payments. The exact information will be released later this year.
  9. As evidence of how difficult it is to accurately predict individual stocks,would you have thought, predicted or known 10 or 20 years ago that these companies would be in the top 11 stocks based on market capitalization in the US?
    1. Apple, Microsoft, Amazon, Facebook or Alphabet/Google.
    2. This is why we recommend utilizing asset class mutual funds, which take the guess work out of stock picking, enabling you to get strong relative performance with excellent tax efficiency and at a very low cost.
  10. As we conclude this incredibly hot summer, consider the progress and increased quality of life we experience by the vast use of air conditioning. In the early 1970s, only about 52% of US households (owned, not rented) had some form of air conditioning. Now, over 90% of US households have air conditioning and over 98% of the homes in the South do. Even for those below the poverty level, more than 83% of US households have air conditioning.


**Source: S&P Spiva Persistence Scorecard, August 2016

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *