Friday, March 27, 2009

Historical Returns for the MSCI Emerging Markets Index

The Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index is one of the most widely-followed emerging markets equity indices. In the investment community, "Emerging Markets" typically refers to a social or business activity of nations that are in the process of rapid growth and industrialization.

There are currently 24 Emerging Markets tracked by the MSCI EM Index: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. Of the tracked Emerging Markets, Brazil, Russia, India, and China (the "BRIC" countries) are arguably the markets with the greatest long-term growth potential.

The chart below lists annual returns for the MSCI EM Index between 1989 and 2008. Returns for the MSCI EM Index from 1993-1998 represent gross dividend reinvested returns, and returns from 1999-2008 represent net dividend reinvested return.* I acquired this data from a .pdf of returns for emerging markets that I found on the website for the Lazard Asset Management investment firm.

As shown, the MSCI EM Index has soared during some years and plummeted during others. In 1993, for example, the MSCI EM Index soared 74.83%, and the five-year annualized return between calendar years 2003-2007 was a whopping 37.02%. However, the MSCI EM Index has also occasionally posted abysmal returns. In 2008 the MSCI EM plummeted 53.33%, and the five-year annualized return of the MSCI EM Index between calendar years 1994-1998 was a pathetic -9.27%.

Despite the incredible volatility of annual returns, the overall annualized return of the MSCI EM Index between 1989 and 2008 was a decent 9.98%, and greatly exceeds the annualized return of 8.42% the S&P 500 Index over the same time period.

Emerging Markets can be an important portion of investment portfolio of any stock market investor. The economies of Emerging Markets typically grow much faster than those of Developed Markets, such as the United States. The performance of equity markets of such countries often has a strong correlation with the overall economic growth of such countries. Moreover, as I have discussed previously, the U.S. Dollar will likely continue to weaken in the future as the country becomes more and more dependent upon foreign investment.

However, given its inherent volatility, many investment advisers recommend limiting Emerging Markets to no more than 10-15% of an aggressive investor's portfolio.

* The performance data shown is slightly different than the performance data I saw for the MSCI EM Index at Index Universe, and I am not sure of the reason for the discrepancy. 
** I have updated this chart to include returns for 2012 in another post.

Saturday, March 14, 2009

"Periodic Tables" of Investment Returns For Select Emerging Markets Through 1993- 2008

I have discovered interesting "periodic tables" of returns for select emerging markets during the years between 1993 and 2008. These charts (click on each chart for a larger view) are interesting and illustrate just how volatile and potentially rewarding investments in emerging markets can be.

Country-specific returns can be extremely volatile. For example, the Turkish stock market had some of the highest and lowest yearly returns for several years during the past 15 years. In 1993, Turkey returned of 207.75%, the highest of the tracked emerging markets. In 1994, however, Turkey had the lowest return of the tracked markets, dropping 52.56%.

I found these charts in a .pdf file on the website for Lazard Asset Management. According to the Lazard website, Lazard Asset Management provides investment management and advisory services to institutional clients, financial intermediaries, private clients and investment vehicles around the world.

Friday, March 13, 2009

Historical Returns for the S&P 400 Midcap Index (Updated Through 2008)

The S&P 400 Midcap Index is the most widely-followed of all U.S. Midcap stock market indices. Midcap stocks are generally defined as those of companies with market capitalizations between $1 billion and $10 billion. ("Market capitalization" refers to the value of outstanding shares of a particular stock.")

The S&P 400 Midcap Index was introduced in June 1991 by Standard & Poors to track the performance of U.S. mid cap stocks. Last year I posted a chart illustrating returns for the S&P 400 Midcap Index up through 2007. I updated the chart to reflect returns for 2008. The chart below illustrates the full year annual returns between 1992 and 2008.

As shown, the S&P 400 Midcap Index had its worst year annual returns in its existence, losing 36.23% in 2008. The terrible returns in 2008 dropped the annualized return from 1992 to 2008 down to 9.50%. This is a large decrease from the annualized return from 1992 to 2007 of 13.26%. The total return between 1992 and 2008 was 367.84%.

The chart below also shows five year annualized returns, starting with the fifth full calendar year of the existence of the S&P 400 Midcap Index (i.e., 1996). As shown, the highest annualized five-year return was 23.05% (between 1995 and 1999) and the lowest was -0.08% (between 2004 and 2008).

As I discussed last year, any long-term investor should seriously consider investing money in midcap stocks, such as those tracking the S&P 400 Midcap Index (e.g., the Midcap SPDR ETF (symbol: MDY) tracks the S&P 400 Midcap Index).

** I have posted an updated chart for the period between 1992-2014.