This column appeared in Better Investing magazine nearly 20 years ago. The only time I now trim my eyebrows is when my wife threatens me.
1998. Paraphrasing a great statesman, “It was a year like all years, filled with events that shape and illuminate our times.” It’s so true. In some ways this one was different, but in many others, the same.
One difference was thanks to the recent space mission, our 12-year-old daughter has now seen Mr. Cronkite, and she now knows who he is. Our 8-year-old observed that he seems to be a “nice, smart man, but he needs to trim his eyebrows.” We gently reminded him to be polite and offered some photos of Albert Einstein. During an afternoon at the Ford Automotive Museum, we discovered that the more “famous” of the Fords was Henry, not the Harrison variety that the kids seem to know better. The kids (and adults) were treated to stories of innovation about the real Mr. Ford and his relationship with Thomas Edison. Alex, in noticing Mr. Edison’s “bad hair day” in a photo, combined with the Einstein photo, and Walter’s eyebrows, decided to muss his hair to see if it stirred his imagination. I’d submit that it already had.
As this issue went to press, we appeared to be headed for another strong annual performance result. 1998 had its moments, including the July-August sell-off which quickly reminded many that these things do happen. Interestingly enough, the September-to-November rebound may have inhibited the message a little. Although far from a market call, we might observe that third and fourth quarter earnings results continue to weaken. If this trend continues, it would be easy to build a case for some tough days ahead.
There are risks associated with investing in stocks. Recent exuberance sometimes makes this message a little hard to deliver. But in 1998, as in every year, one of our core messages is to encourage investors to stay the course, no matter what tomorrow brings. The greater risk, to us, is that of NOT being involved.
The Wall Street Journal caused a bad hair day for the NAIC last week, followed by legions of syndicated translations nationwide in the days that followed. The Chicago Tribune decided that their own interpretation was “Join an Investment Club? No Thanks!”
We might suggest two themes for your consideration. The first is that it’s possible that, once again, the message delivered misses the point. See “Our Editor’s Reaction” below.
The second is that it’s time to extinguish some of the mystery. NAIC investors are extremely successful, so much so that we’ll continually be challenged by those untouched by our community and experience. It’s time for a factual debate and apples vs. apples comparisons. In the months ahead, we’ll look to explore the facts and share them with you.
The annual performance of growth mutual fund managers is commonly cited. We read that 5, 10, 20 and in rare cases, 30 or 40 percent of funds exceed the S&P 500 in a given year. The NAIC has conducted surveys, going back decades, that measure performance, using lifetime statistics and a more stringent comparison, as we assess performance. Placing mutual funds under a multiyear microscope, here’s a chilling statistic. From a sample of 3,637 funds, regardless of type, 18 or 0.5 percent (that’s 1-in-200, folks) outperformed the S&RP 500 over the last five years.
It’s time to explore our fascinating track record and Great Expectations going forward. As for our eight year old, Alex, I doubt that he’ll ever trim his eyebrows.
The NAIC wishes a most jubilant and safe holiday season, to you and your family.
Expecting Alpha 