Cycles of Investing

The Good Book tells us, "There is a season and a time for every matter under heaven"-Ecclesiastes 3:1.

Likewise, in the world of investing every type of asset has its day in the sun and every type of asset has its winter.

You will often do well as an investor if you buy the asset that has been beat up in price the last 5-10 years and you are cautious about adding to assets that have appreciated significantly during that time span.

With that in mind, I did some research on the returns of different types of assets from 1999-2006. My compliance disclaimer is that these figures are for illustrative purposes only and are not to be construed as specific investment advice for individuals. Always check with your financial advisor as to what is appropriate for your situation.

Here are the 8-year average annual returns for the following assets. I chose this eight year time period because some of these asset types only date back to 1999.

• Small-Cap Stock Index (Russell 1725): 8.02%
• Large Growth Stock Index (Russell 1000 Growth): -0.75%
• Large Value Stock Index (Russell 1000 Value): 7.76%
• International Stock Index (EAFE): 6.70%
• Real Estate Index (REIT Index): 18.65%
• Multi-Strategy Hedge Fund Index (Barclay): 11.90%
• Bond Index (Lehman Brothers): 5.44%
• Commodity Index (Goldman Sachs): 14.10%

I like the odds that large company growth stocks will do better than real estate over the next 8 years. But sadly, many investors will see the recent returns of real estate and will load up their 401ks and investment accounts with real estate funds.

One of my fundamental beliefs is that in life you will do much better if you go against the crowd, but it is sometimes a lonely place. Soren Kierkegaard, "The majority of people are not so afraid of holding a wrong opinion, as they are of holding an opinion alone."

For The Goal of Wise Stewardship,

Ashley Hodge