Vous êtes sur la page 1sur 6

Over 40 Years of Reliable Investing

Essential Wisdom for


Todays Market
Recognize That Historically, Periods of Low Returns for Stocks
Have Been Followed by Periods of Higher Returns1
Though frustrating, stretches of disappointing results for the
market are not unprecedented. History shows however, that these
difcult stretches have been followed by periods of recovery.
Why? Because lower prices increase future returns.
Christopher C. Davis
Portfolio Manager, Davis Advisors
History shows that disappointing
10 year periods for stocks, though rare,
do occur. While such stretches can
test an investors conviction, long-term
investors should recognize that these
poor periods have always been followed
by periods of recovery.1
This important concept is illustrated
in the chart below. The tan bars
represent the worst 10 year stretches
for the market since 1928. The green
bars represent the 10 year average
annual returns that followed these
difcult periods.
In every case, the 10 year period
following these disappointing stretches
produced satisfactory returns. For
example, the disappointing 1.2% return
for the 10 year period ending in 1974
was followed by a 14.8% return for
the 10 year period ending in 1984.
Furthermore, these periods of recovery
averaged 10% per year.
While no one knows what the next
10 years will bring, history shows that
investors with long-term goals should
consider maintaining or adding to their
stock holdings after a prolonged period
of poor market returns.
1. There is no guarantee that in the future the market will be better than it has been in the past. Discussion of stock performance refers to the Dow Jones Industrial
Average for the period from 1928 through 1957 and the S&P 500 Index for the period from 1958 through 2012. Past performance is not a guarantee of future results.
Poor Periods for the Market Have Always Been Followed by Stronger Periods
0%
5%
5%
l0%
l5%
20%
Subsequent 10 Year Market Returns 10 Year Market Returns Less Than 5%
l
9
2
8

3
7
l
9
3
8

4
7
0.2%
9.3%
l
9
2
9

3
8
l
9
3
9

4
8
6.6%
l.7%
l
9
3
0

3
9
l
9
4
0

4
9
0.l%
8.5%
l
9
3
l

4
0
l
9
4
l

5
0
2.7%
l2.l%
l
9
3
7

4
6
l
9
4
7

5
6
4.8%
l7.6%
l
9
6
5

7
4
l
9
7
5

8
4
l.2%
l4.8%
l
9
6
6

7
5
l
9
7
6

8
5
3.3%
l4.3%
l
9
6
8

7
7
l
9
7
8

8
7
3.6%
l5.3%
l
9
6
9

7
8
l
9
7
9

8
8
3.2%
l6.3%
2
0
0
2

l
l
2
0
l
2

2
l
?
2.9%
Source: Thomson Financial, Lipper and Bloomberg. Chart represents when the annualized market returns were less than 5%. Periods where there is not a subsequent
10 year period are not shown. The market is represented by the Dow Jones Industrial Average for the period from 1928 through 1957 and by the S&P 500 Index for
the period from 1958 through 2012. Investments cannot be made directly in an index. The performance shown is not indicative of any particular Davis investment.
Past performance is not a guarantee of future results.
There is no guarantee that the average stock fund will continue to outperform the average stock fund investor in the future. Equity markets are volatile and
average stock funds and/or average stock fund investors may lose money.
Avoid Self-Destructive Investor Behavior
Source: Quantitative Analysis of Investor Behavior by Dalbar, Inc. (March 2013) and Lipper. Dalbar computed the average stock fund investor return by using industry
cash ow reports from the Investment Company Institute. The average stock fund return gures represent the average return for all funds listed in Lippers U.S.
Diversied Equity fund classication model. Dalbar also measured the behavior of an asset allocation investor that uses a mix of equity and xed income investments.
The annualized return for this investor type was 2.3% over the time frame measured. All Dalbar returns were computed using the S&P 500 Index. Returns assume
reinvestment of dividends and capital gain distributions. The fact that buy and hold has been a successful strategy in the past does not guarantee that it will continue
to be successful in the future. The performance shown is not indicative of any particular Davis investment. Past performance is not a guarantee of future results.
Average Stock Fund Return vs. Average Stock Fund Investor Return
0%
2%
4%
6%
l0%
8%
993202
Averuge Stocl lund Peturn
A
v
e
r
u
g
e

A
n
n
u
u
l

P
e
t
u
r
n
8.6%
Averuge Stocl lund nvestor Peturn
4.3%
Investor Behavior Penalty
A study by Dalbar underscores the
importance of controlling emotions
and avoiding self-destructive investor
behavior. From 1993 to 2012, the average
stock fund returned 8.6% annually while
the average stock fund investor earned
only 4.3%. We call the gap between these
results the investor behavior penalty.
Why have investors historically
sacriced half their potential return?
Driven by emotions like fear and greed,
they succumbed to negative behavior
such as:

Pouring money into the latest


top-performing manager or asset
class, expecting the winning streak
to continue

Avoiding areas of the market that


have performed poorly, assuming
recovery will never occur

Abandoning their investment plan by


attempting to successfully time moves
in and out of the market, a near
impossible feat
Successful investors throughout
history have understood that building
long-term wealth requires the ability
to control emotions and avoid self-
destructive investor behavior.
Individuals who cannot master their emotions are
ill-suited to prot from the investment process.
Benjamin Graham
Father of Value Investing
Understand That Short-Term Underperformance is Inevitable
Most investors nd periods of short-
term underperformance frustrating.
Yet such periods are inevitable when
building long-term wealth.
To prove this point, we conducted a
study to determine what percentage of
top-performing investment managers
from 2003 to 2012 experienced a period
of short-term underperformance on
their way to building an attractive
long-term track record.
The results are eye-opening:

95% of the top-performing managers


from 2003 to 2012 fell into the bottom
half of their peer groups for at least
one three year period

70% fell into the bottom quarter of


their peer groups for at least one
three year period
Though each of the managers in this
study delivered excellent long-term
returns over the entire 10 year period,
almost all experienced a difcult stretch
along the way.
Investors who recognize and prepare
for the fact that short-term under-
performance is inevitableeven from
the best managersmay be less likely to
make unnecessary and often destructive
changes in their investment plans.
History shows that even the most successful investors have
encountered periods of poor performance. Such periods are inevitable
and will measure whether an investor has the conviction, courage and
discipline necessary to beat the market over the long term.
Shelby Cullom Davis
Legendary Investor, Davis Investment Discipline Founder
Source: Davis Advisors. 150 managers from eVestment Alliances large cap universe whose 10 year gross of fee average annualized performance ranked in the top
quartile from January 1, 2003 to December 31, 2012. Past performance is not a guarantee of future results.
8ottom Hul 8ottom Quurter
70%
95%
0%
20%
40%
80%
60%
l00%
2003202
Percentage of Top Quartile Large Cap Equity Managers Whose Performance Fell
Into the Bottom Half or Quarter for at Least One Three Year Period
Sixty years of successfully investing in equities has
taught us that long-term investors will inevitably
encounter economic and market uncertainty. History
shows that uncertainty is the rule, not the exception.
Despite these frustrating stretches, the market has
continued to grow over the long term.
To benet from the wealth-building potential of stocks,
investors must remain unemotional, disciplined and
focused on the long term. With that in mind, we have
collected three essential pieces of investment wisdom
that all investors should remember as they navigate
todays market.
This material may be shared with existing and
potential clients to provide information concerning
market conditions and the investment strategies
and techniques used by Davis Advisors to manage
its client accounts. Please refer to Davis Advisors
Form ADV Part 2 for more information regarding
investment strategies, risks, charges, and expenses.
Clients should also review other relevant material,
including a schedule of investments listing
securities held in their account.
All investments contain risk and may lose value.
There is no guarantee that these investment
strategies will work under all market conditions,
and each investor should evaluate their ability to
invest for the long term, especially during periods
of downturn in the market.
Davis Advisors investment professionals make
candid statements and observations regarding
economic conditions and current and historical
market conditions. However, there is no guarantee
that these statements, opinions or forecasts will
prove to be correct. All investments involve some
degree of risk, and there can be no assurance
that Davis Advisors investment strategies will be
successful. The value of equity investments will
vary so that, when sold, an investment could be
worth more or less than its original cost.
Dalbar, a Boston-based nancial research
rm that is independent from Davis Advisors,
researched the result of actively trading mutual
funds in a report entitled Quantitative Analysis
of Investor Behavior (QAIB). The Dalbar report
covered the time periods from 19932012.
The Lipper Equity LANA Universe includes all
U.S. registered equity and mixed-equity mutual
funds with data available through Lipper. The fact
that buy and hold has been a successful strategy
in the past does not guarantee that it will continue
to be successful in the future.
The charts in this report are used to illustrate
specic points. No chart, formula or other
device can, by itself, guide an investor as to what
securities should be bought or sold or when to
buy or sell them. Although the facts in this report
have been obtained from and are based on sources
we believe to be reliable, we do not guarantee
their accuracy, and such information is subject to
change without notice.
Benjamin Graham is not associated in any way
with Davis Selected Advisers, Davis Advisors or
their afliates.
The S&P 500 Index is an unmanaged index
of 500 selected common stocks, most of which
are listed on the New York Stock Exchange.
The Index is adjusted for dividends, weighted
towards stocks with large market capitalizations
and represents approximately two-thirds of the
total market value of all domestic common stocks.
The Dow Jones Industrial Average is a price-
weighted average of 30 actively traded blue chip
stocks. The Dow Jones is calculated by adding
the closing prices of the component stocks and
using a divisor that is adjusted for splits and stock
dividends equal to 10% or more of the market
value of an issue as well as substitutions and
mergers. The average is quoted in points, not in
dollars. Investments cannot be made directly in
an index.
Broker-dealers and other nancial intermediaries
may charge Davis Advisors substantial fees for
selling its products and providing continuing
support to clients and shareholders. For example,
broker-dealers and other nancial intermediaries
may charge: sales commissions; distribution
and service fees; and record-keeping fees. In
addition, payments or reimbursements may be
requested for: marketing support concerning
Davis Advisors products; placement on a list of
ofered products; access to sales meetings, sales
representatives and management representatives;
and participation in conferences or seminars,
sales or training programs for invited registered
representatives and other employees, client and
investor events, and other dealer-sponsored
events. Financial advisors should not consider
Davis Advisors payment(s) to a nancial
intermediary as a basis for recommending
Davis Advisors.
Shares of the Davis Funds are not deposits or
obligations of any bank, are not guaranteed by
any bank, are not insured by FDIC or any other
agency, and involve investment risks, including
possible loss of the principal amount invested.
Davis Advisors
2949 East Elvira Road, Suite101, Tucson, AZ 85756
800-279-0279
Item #455312/12

Vous aimerez peut-être aussi