1989-2008 Annual Returns for Select Developed Markets

The chart below illustrates annual returns between 1989 and 2008 for select developed foreign markets. The chart shows the returns for the various MS country indices for Australia, Canada, France, Germany, Hong Kong, Japan, Switzerland, and the United Kingdom. As references, the chart also includes annual returns (in terms of U.S. Dollars) for the MSCI EAFE Index of foreign developed markets and for the U.S., as represented by the S&P 500 Index.

Many investors invest at least part of their stock market portfolio in foreign stocks, such as emerging markets and/or foreign developed markets. The most widely followed index of foreign developed markets is the MSCI EAFE Index. As I have previously mentioned, the U.S. Dollar will likely continue to weaken over time versus foreign currencies as a result of ongoing budget and trade deficits.

As shown in the chart below, the MSCI EAFE Index provided a meager cumulative return of about 85.70% between 1989 and 2008, an annualized return of just about 3.14%. The returns of the MSCI EAFE Index were dragged down by the abysmal performance of the Japanese stocks. The MS Japan country index had a cumulative return of -39.51%, or an annualized return of -2.48% during the period tracked.

However, strong performances were realized by some of the foreign developed markets. As shown, the MS Switzerland Index realized an impressive cumulative return of about 648%, or about 10.52% per year. Hong Kong was another strong performer, returning about 569%, or 9.98% per year.

Some of the weaker performances were realized by the United Kingdom and Australia. The MS United Kingdom country Index returned a total of about 268%, or 6.74% per year. The MS Australia country Index, on the other hand, returned a total of about 274%, or 6.83% per year.

U.S. stocks performed well in comparison to the foreign developed markets tracked, beating all of the foreign markets tracked except for Switzerland and Hong Kong. The S&P 500 Index returned a total of about 404%, or about 8.42% per year during the period tracked.

Recession Era Car Insurance: Get Aggressive About Discounts

In these tough economic times, cutting expenses isn’t just good sense, it’s a must. Drivers can’t do without car insurance; the law won’t let you. But there’s no law that says you have to pay through the nose when insuring your auto. When you start looking for an auto policy, remember these key points to do some deep “discount diving.”

Not all discounts are obvious.

Everyone knows that insurance companies like things like passive restraint systems and anti-theft devices, but most customers don’t know that in assessing risk, insurers also look at education and employment. People in the science and math fields, as well as engineers, have the lowest risk profiles and can actually get discounts of 10 to 30 percent on their policies. The same is true for educators, which is fairly common knowledge, but farming is the next lowest associated risk occupation. Bring it up. It never hurts to ask.

Service and experience are valuable.

Active duty and retired military personnel are eligible for discounts of 2 to 15 percent. (Service men and women who are going overseas can also decrease their coverage on stored vehicles.) Retirees often qualify for discounts of up to 45 percent if they have a good driving record and are members of AARP.

Buying in volume works for insurance too.

Taking out more than one type of insurance policy with the same insurance company is sure to garner discounts. Look for family rates if multiple drivers are to be insured, and ask about special programs for teen drivers. Some companies have new insurance products that will lower rates for drivers in this high risk category if a GPS tracking device controlled by the parent is installed on the vehicle.

Defensive driving isn’t just for when you get a ticket.

Often policy holders who will agree to take a defensive driving class will qualify for lower premiums. Now these courses are available online or via DVDs that can be rented in most video stores, minimizing the inconvenience. These days, the few hours spent on the course are well worth the dollars saved.

By aggressively seeking out little known discounts, being prepared to comparison shop for coverage, and not shying away from negotiation, insurance customers can reap the benefit of big savings. In the midst of a recession, when you’re lucky to be able to meet the car payment, there’s no reason to pay unnecessarily high rates for your auto policy.

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.

"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.

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.

Annualized Returns for Stock Market Indices By Decade (1980s - Present)

In my previous post, I discussed annual stock market and bond market returns for various indices for the time period from 1980-2008. Viewing annual returns since 1980 can be very illuminating and show the impressive effects of annual compounding of investment returns over time. However, even more information may be gleaned by viewing index returns on a decade-by-decade basis.

The chart below (click on the chart for a larger view) illustrates decade-by-decade returns for various stock and bond indices during the 1980s, 1990s, and 2000s (through 2008). The chart below illuistrates returns for small cap indices (Russell 2000, Russell 2000 Value, and Russell 2000 Growth), large cap indices (S&P 500, S&P/Citi 500 Value*, and S&P/Citi 500 Growth*), a broad-based foreign stock index (the Morgan Stanley Capital International Index for the developed stock markets of Europe, Australasia, and the Far East ("MSCI EAFE index")), an index of bonds (Lehman Brothers Aggregate Bond Index ("LB Agg.")), and the Nasdaq Composite Index.

Only three of the indices tracked have provided positive returns for each decade since the 1980s: the Russell 2000 Value, Russell 2000, and LB Agg. The Russell 2000 Value provided annualized returns of 17.44% during the 1980s, 12.45% during the 1990s, and 6.98% so far in the 2000s.

As everyone now knows, there was a tremendous stock market bubble which accumulated throughout the 1990s. The Nasdaq Composite was one of the primary beneficiaries of the bubble valuations, rising a whopping annualized 24.5% throughout the 1990s, for a total return of about 794%. Such returns proved to be unsustainable, however, as the Nasdaq Composite has droppjavascript:void(0)ed a total of about 61% since 2000, for an annualized return during the 2000s (through 2008) of -10%.

The MSCI EAFE Index was also the beneficiary of a bubble, although it rose to lofty valuations during the Japan equity bubble of the 1980s. During the 1980s, the MSCI EAFE Index rose an impressive 630%, or about 22% on an annualized basis. Returns during the 1990s were far worse, with the MSCI EAFE Index rising only 96.99%, or about 7% per year. The MSCI has provided negative returns during the 2000s, dropping a total of 14.71%, or about 1.75% per year.

The S&P 500 Index provided strong and steady returns during the 1980s and 1990s until the U.S. stock market bubble burst in 2000. The S&P 500 Index returned about 403% during the 1980s and an additional 432% during the 1990s, for annualized returns during those decades of about 17.5% and 18.2%, respectively. The 2000s, however, have been far worse, with the index dropping 28% so far through 2008, for an annualized return of about -3.6%.

The returns shown in the chart above show the volatility that investors may face when chasing performance. The biggest winner of the 1990s (the MSCI EAFE Index) has lagged other indices since the 1990s, and the winners during the 1990s (e.g., the S&P 500 indices and the Nasdaq Composite) have substantially lagged during the 2000s (up through 2008). I can only speculate as to which indices will outperform during the coming decades. However, I would bet that Small Cap Value stocks will continue to outperform other indices over long periods of time.

1980 - 2008 Stock Market Returns for Various Indices

In 2007 and 2008, I posted charts of the annual stock market and bond market returns for various indices for the time periods from 1980-2006 and 1980-2007, respectively. The charts I previously posted included returns for small cap indices (Russell 2000, Russell 2000 Value, and Russell 2000 Growth), large cap indices (S&P 500, S&P/Citi 500 Value, and S&P/Citi 500 Growth), a broad-based foreign stock index(Morgan Stanley Capital International Index for the developed stock markets of Europe, Australasia, and the Far East ("MSCI EAFE index")), an index of bonds (Lehman Brothers Aggregate Bond Index ("LB Agg.")), and the Nasdaq Composite Index. I have updated the chart (click on the image for a larger view) to reflect returns for 2008.

2008 was an awful year for stock indices, providing the worst calendar year returns since the 1930s. Despite the horrible 2008 returns, all of the indices tracked in the chart below have provided returns far in excess of inflation since 1980 (inflation has averaged somewhere between 3 and 4 percent since 1980). The Russell 2000 Value index has outperformed all other investment styles over the time frame, returning 2864%, which is an average annual return of about 12.40%. This is total return is especially impressive when one considers that Small Cap Value stocks lost over 28% in 2008. The overall formidable return of the Russell 2000 Value index is to be expected, given that Small Cap Value stocks have routinely outperformed other investment styles over long periods of time as I have previously discussed.

The Russell 2000 Growth Index is the worst performer since 1980, providing a total return of just 582% over the time period, or about 6.85% per year. The returns for Small Cap Growth stocks have been very poor since the 1980s and I question whether a return of just 2-3% above inflation since the 1980s is an adequate return for the excess risk involved in holding Small Cap Value stocks.

The S&P 500 Index dropped 37% - the index had its worst calendar year return since it was created in 1957. Including the S&P 90 Index, the predecessor to the S&P 500 index, the last time that a diversified large cap U.S. index dropped this much was in 1934, when the S&P 90 dropped over 43%.

Tech stocks also took a beating in 2008, as evidenced by the 40% drop in the Nasdaq Composite Index. That is the worst calendar year performance for the Nasdaq Composite since it was created in 1971.

International stocks were the worst performers of all of the indices I tracked last year, with the MSCI EAFE Index dropping over 43% after several years of impressive returns. The MSCI EAFE Index broke its 6-year winning streak over the S&P 500 Index in 2008. However, I suspect that international stocks will soon outperform U.S. stocks again, given that the U.S. runs an enormous trade deficit with the rest of the world and the U.S. dollar will inevitably weaken.

The only index providing a positive return was the LB Agg.**, which tracks U.S. government, corporate, and mortgage-backed securities with maturities of at least one year. The LB Agg. rose about 5.24% in 2008. Since 1980, the LB Agg. has provided annualized returns of about 8.88%, despite exhibiting far less volatility than the other stock market indices tracked in the chart below.


* I acquired most of the returns in this chart from old versions of the Callan "Periodic Table" of investment returns.

** The LB Agg. bong index has since been renamed the Barclays Capital Aggregate Bond Index ("BC Agg.").

*** Edit - January 2, 2017 ***
I have updated this chart with results through 2016.

Updated "Periodic Table" of Equity Style Investment Returns Through 2008

An updated version of the Callan "Periodic Table" of equity style investment returns from 1989-2008 is posted below. (Click on the image below to see a larger version of the Periodic Table.) This Periodic Table illustrates calendar year returns for several indices, including the S&P 500, S&P/Citigroup 500 Growth, S&P 500/Citigroup 500 Value, Russell 2000, Russell 2000 Value, Russell 2000 Growth, MSCI EAFE, BC Agg bond, and NAREIT Equity REIT.

This chart was originally posted on the website for Callan Associates.

Historical Annual Returns for the S&P 500 Index

As I have discussed previously, the S&P 500 Index is arguably the most widely-followed U.S. stock market index. The S&P 500 Index is a market cap-weighted index of U.S. equities of 500 large companies.

Standard & Poor's introduced its first stock market index in 1923 and created the S&P 500 Index in 1957. Prior to 1957, Standard & Poor's utilized a different index, the S&P 90 Index, that tracked performance of large company stocks. Accordingly, market returns for the S&P 500 Index and it predecessor index are available going back to the 1920s. I have been able to locate a website with such returns dating back to 1926, as shown in the charts below (click on either chart for a larger view).

The YTD total return (including dividends) for the S&P 500 Index is approximately -39.4%. If the S&P 500 Index were to end the year at the same level as it closed on Friday, November 14, 2008, this would constitute the second worst annual return for the S&P 500 Index (or its predecessor index) in the 83 years for which I have data. The only year with a worse performance was 1934, during the midst of the Great Depression, when the index dropped about 43.34%!

The U.S. economy is almost certainly in a recession and it could last several additional quarters, and possibly through the end of 2009. However, the onslaught of another "Great Depression" is hard to imagine, so this might be a good time to consider investing more money back in the market at the current depressed levels.

The charts below list calendar year returns, annualized returns through the end of each calendar year, and annualized returns for 5-, 10-, 15-, 20-, and 25-year periods. As shown, as of today, the annualized return of the S&P 500 Index (and its predecessor index) is about 9.26%, the 5-year annualized return is about -2.92%, the 10-year annualized return is about -1.75%, and 15-year annualized return is about 6.19%, the 20-year annualized return is about 8.22%, and the 25-year annualized return is about 9.61%.

The current 5-year annualized return of -2.92% is the worst it has been since 1941, during World War II, when the annualized 5-year return was about -7.51%. The current 10-year annualized return of about -1.75% is the worst it has ever been based on the data I have back through 1926!

The S&P 500 Index is at extremely low valuations relative to where it has been in recent years. I have a strong feeling that sometime in the future investors are going to look back at the 2008 market and realize that stocks were a screaming "buy." My assessment does not mean that I expect stocks to pop up 40% in a short period of time from where they are now. Instead, it wouldn't surprise me to see the S&P 500 Index drop another 10% from where it is now, as there is quite a bit of fear in the markets at this time and investors have lost confidence in the markets. However, as some point the S&P Index and other U.S. stocks will be much, much higher than they are today, as legendary investor Warren Buffet argued last month.



I have posted an updated chart for the returns of the S&P 500 Index during the period between 1926-2015.

Some Members of Congress Are Considering Eliminating 401(k) Plans

I was reading the most recent issue of Forbes magazine today (dated November 24, 2008) and saw a blurb by one of the columnists who claimed that some members of Congress are considering legislation that would abolish 401k plans. I assumed that was probably mere hyperbole. However, I did some Internet searching and discovered that it is true!

High ranking democrats in the House of Representatives are exploring the possibility of eliminating $80 billion in "tax breaks" on 401(k) plans. Eliminating such tax breaks would mean that money investing in 401(k) plans would no longer be pre-tax. It's a bit of a misnomer to call these "tax" breaks, in my opinion, seeing as how money invested in 401(k) plans is eventually taxed when it is withdrawn from the plan. Accordingly, money invested in 401(k) plans is merely tax-deferred - it's not as though the money is just never taxed at all.

House Education and Labor Committee Chairman George Miller, D-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, are apparently pushing to remove the tax-deferral status of 401(k) plans and would like to implement a new system of guaranteed retirement accounts to which all workers would be required to contribute.

Teresa Ghilarducci, a professor of economic-policy analysis at the New School for Social Research in New York, has drafted a plan that is being considered by Miller and McDermott, among others. Under Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would a pay 3% a year, adjusted for inflation.

I realize that the stock market returns over the past decade have been pathetic, but locking everyone into a plan that only returns 3 percent a year and forcing everyone to invest 5% of their salaries in it is ridiculous! Since 1926, the U.S. stock market has returned an average of close to 10% per year, or around 7% in real terms when accounting for inflation. Forcing a 25 year-old worker, for example, to pay into such a system for the next 40+ years with such low returns seems like a complete waste of financial resources.

This would be a dramatic expansion of the current Social Security system. It is obvious that the current Social Security system has major problems and may at some point in the near future run out of money. Expanding such a pension-type of welfare system would be one of the stupidest things that the morons running Congress could possibly do. I really hope that this plan doesn't get much support in Congress and it it does, I hope that the new president Obama has the wise judgment to reject such a wasteful and expensive plan.

New Designs for the 2009 U.S. Penny

In September 2007 I discussed proposed new designs for the 2009 Lincoln cent (a.k.a., the U.S. penny coin). The front side of the Lincoln cent will remain unchanged, continuing to show a profile view of Abraham Lincoln. The obverse side, however, will be changed to commemorate the 200th anniversary of Lincoln's birth. (2009 will also mark the 100th anniversary of the Lincoln cent - the first Lincoln cents were introduced in 1909.) This will mark the second time that the observe has been changed. Between 1909 and 1958, wheat stalks were shown on the observe side and the current design of the Lincoln Memorial has been shown on the obverse side since 1959.

There are going to be four new designs shown on the obverse sides of Lincoln cents in 2009, with a new design being introduced every three months. The first new Lincoln cent is scheduled to be introduced into circulation on February 12, 2009, Lincoln's birthday.

The first design shows a log cabin, representing the cabin in Kentucky where Lincoln was born. The second design depicts a young Lincoln reading a book while taking a break from working as a rail splitter in Indiana. The third design shows Lincoln as a young lawyer standing in front of the former Illinois state capitol building in Springfield, Illinois. The fourth coin depicts the half-completed U.S. Capitol dome, representative of Lincoln's order that construction of the Capitol continue during the Civil War as a symbol that the Union would survive.

Historical Returns for the S&P 400 Midcap Index

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.")

I have previously posted about historical returns for large cap stocks, such as the S&P 500, and of small cap stocks, such as the Russell 2000. I have also posted about the long-term outperformance of small cap value stocks over long periods of time. Investors should also consider investing in Midcap stocks, as they tend to outperform large cap stocks over time with less volatility than small cap stocks. The S&P 400 Midcap Index was introduced in June 1991 by Standard & Poors to track the performance of U.S. mid cap stocks.

The table below illustrates the full year annual returns of the S&P 400 Midcap index between 1992 and 2007. As shown, the S&P 400 Midcap Index returned an annualized average of 13.26% between 1992 and 2007. Between 1992 and 2007, the index rose an impressive 633.34%. 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 6.41% (between 1998 and 2002).

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 1992-2022.

TradingDirect Offers The Best Margin Rates For Investors

Last November I wrote a post about how Fidelity offers a low margin rate for wealthy investors. As of today, July 14, 2008, the lowest margin rate provided by Fidelity is 4.00%. An investor would need to maintain a debit balance of at least $500,000 in order to receive this low margin rate.

Although the Fidelity margin rate is quite low, I recently discovered that TradingDirect offers a far lower margin rate. TradingDirect offers a margin rate as low as 2.75% for debite balances of over $1,000,000. Here is a chart showing the TradingDirect margin rates as of today:

Website With Interesting Interest Rate Information

I recently discovered an interesting website that lists various key interest rate information. The website is money-rates.com and it lists current national average money market rates, the prime rate, discount rates, broker call rate, U.S. savings bonds rates, and 30- and 15-year mortgage rates. Such interest rate information is highly relevant to any stock market investor, as stocks tend to be relatively more attractive when interest rates are low. Here is a an image from the website that I captured today:

The U.S. House of Representatives Voted to Change the Composition of Penny and Nickel Coins

The U.S. House of Representatives voted on May 8, 2008 to change the composition of penny and nickel coins to less expensive metals. As I have previously discussed, the U.S. Mint currently loses millions of dollars a year on minting costs associated with producing nickel and penny coins. Nickels currently contain 75% copper and 25% nickel and pennies contain about 97.5% zinc and 2.5% copper. Due to the enormous increase in value of commodities, such as nickel, copper, and zinc, over the past few years, the Mint has been losing money by producing these coins and then selling them to banks at face value. A penny currently costs about 1.26 cents to produce and a nickel costs about 7.7 cents to produce.

The U.S. Mint enacted a law making it illegal to melt down pennies and nickels in December 2006 to prevent people from hoarding pennies and nickels and melting them down to profit from the increased value of the metals in such coins. On May 8, 2008, the House of Representatives voted to change the composition of pennies to a copper-plated steel composition and nickel coins to primarily a steel-based coin. The new penny and nickel coins are both projected to cost less than their respective face values, saving the U.S. Mint millions of dollars annually.

The bill still has to make its way through Congress and be approved by the Bush administration. Apparently there are some objections to some of its current provisions, so it is unclear as to when the coin compositions will actually be changed, if at all.