Sunday, August 28, 2011

Historical Returns for the MSCI EM Latin America Index (1988-2010)

Morgan Stanley Capital International, Inc. ("MSCI") created an index to track the performance of Latin American stocks in the late 1980s. The MSCI Emerging Markets (EM) Latin America Index was instituted with a market closing value of 100.00 as of December 31, 1987. It is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets in Latin America. According to the MSCI website, the MSCI EM Latin America Index currently consists of a combination of the following market returns for Brazil, Chile, Colombia, Mexico, and Peru. The Index is dominated by Brazil and the Mexico, the two largest Latin American economies and stock markets.

Since its inception, the returns for the MSCI EM Latin America Index, although very volatile, have been nothing short of astounding. The MSCI EM Latin America Index closed at a value of 9519.625 on December 31, 2010, a gain of an incredible 9,419.6% since its inception 23 years earlier. The annualized gain of the Index during this time period was 21.91%.

The chart below shows the annual returns for the MSCI EM Latin America Index between 1988 and 2010 and also indicates 5-, 10-, 15-, and 20- year annualized returns. During 23 full calendar years of its existence, the Index increased in value for 16 years and decreased in value for 7 years. The largest calendar year gains were achieved in 1991 and 2009 when the Index soared 149.66% and 104.19%, respectively. The largest calendar year losses were recorded in 1998 and 2008 when the Index soared 35.11% and 51.28%, respectively.

The largest 5-year gain was recorded between 2003 and 2007 when the Index soared 688% for an annualized gain of just over 51% per year during that time period. There were only two 5-year periods during which the Index lost value - those between (a) 1994-1998 when the Index lost 1.74% per annum, and (b) 1998-2002 when the Index lost 7.85% per annum.

There are 14 different 10-year periods shown in the chart below and the Index gained value during each of those 10-year periods. The largest 10-year gain occurred between 1988-1997 when the Index gained 1,489%, or 31.87% per annum.

There are 9 different 15-year periods shown in the chart below and the Index gained value during each of those 15-year periods. The largest 15-year gain occurred between 1991-2005 when the Index gained 1,390%, or 19.74% per annum. [Note that the largest 10-year total return exceeds the largest 15-year total return!]

There are 4 different 20-year periods shown in the chart below and the Index gained value during each of those 10-year periods. The largest 20-year gain occurred between 1988-2007 when the Index gained 8,229%, or 24.75% per annum.

Unfortunately there is no ETF currently available that tracks the MSCI EM Latin America Index. The closest proxy that I have been able to locate is the iShares S&P Latin America 40 Index ETF (symbol: ILF), which tracks an index of stocks trading on the exchanges of four Latin American countries - Mexico, Brazil, Argentina, and Chile.

Although extremely volatile, Latin American stocks can provide quite a kick to investment returns during a bull market. Someone holding an ETF tracking Latin American stocks should consider periodically rebalancing the position to (a) lock in capital gains after years during which those stocks have soared, or (b) increase a position after a year during which the Index dropped in value.

*** I have updated this chart to include returns for 2013 in another post.


Anonymous said...

I'm curious why you don't just publish a link to the site where you get this data rather than pasting it up on your blog in order to try to make adsense money off of it. Aren't you a bit ashamed of doing this?

I know you won't publish this, but would appreciate you addressing the question.

Anonymous said...

By the way I think the most interesting chart would be # of posts you have in a given year vs. return on the S&P 500 for that year. I think you will see a direct correlation. look at 2006/2007 vs. 2008/2009 LOL In fact, im going to monitor your blog from here on out. The more enthusiastic you get about stocks, the more I'm going to sell. This will be far more valuable than the tables you steal from other websites and repost here.

Jim said...

^^^ Hey moron, I calculated the annual returns myself from spreadsheets that are available for anyone to download from the MSCI website which I clearly linked in the article I wrote. Perhaps you criticize because you have some type of learning disability preventing you from locating raw data that is publicly available?

If I only posted a link to the MSCI website and didn't include a chart created from spreadsheet calculations I made myself, this information would be of little use to myself or a complainer such as yourself.

I also didn't "steal" any of the calculations in this chart from anyone else. In fact, I created this chart because I specifically couldn't find annual returns in this format anywhere on the Internet.

If you have an issue with my blog, why even bother posting a comment?

I don't work in the financial industry myself and post these charts for my own benefit and for the benefit of many others seem to find these charts useful.

Anonymous said...

I, for one, found the chart quite useful, and I appreciate you sharing it. I have likewise not found this information in an easily-digestible format such as what you presented. Thank you!