The "Worst" Investment Strategy

Hi Friends,

Let’s talk about a topic that’s been making headlines: the performance of the S&P 500 and its impact on investment strategies.

Over the last two years, the S&P 500 has been the best-performing major asset class.?

As we often see historically, even as it's become relatively more and more expensive, this has attracted a record-breaking amount of new investments.

In fact, the Vanguard S&P 500 ETF set a new record with inflows exceeding $117 billion last year alone—more than double the previous record. Additionally, U.S. stock funds? had more than six times the amount of new investment dollars added to them last year compared to international stock funds, according to Morningstar.

But is this really the right move? Should you follow the crowd and invest heavily in the large U.S. stocks that have performed so well? Or should you consider something else, like international stocks or other asset classes that have recently underperformed?

To answer this, we examined the performance of seven major asset classes over the past 25 years:

We then studied two distinct and opposite strategies:

• Invest in the best-performing asset class from the prior year.
• Invest in the worst-performing asset class from the prior year.?

Let’s start with the popular choice—investing in the best-performing asset class.

This strategy has produced an average annual return of 4.8% over the past 25 years and $1M grew to $1.8M.?

?

Now let’s look at doing the exact opposite of most- investing in the prior year’s worst performing asset class instead:

The results are stunning!?

This counterintuitive strategy resulted in an average annual return of 9.2% and a final investment value that was triple the strategy of investing in the best performing asset class.

So how do we take advantage of this for you at Presilium?

By rebalancing your investment accounts on a regular basis, which in practice means doing something often not viewed as a popular decision in the moment:

Selling part of your best performing asset classes to invest more in the worst performing.?

By doing this, we hope to decrease your overall risk, improve your returns over time, and, in turn, reach even more of your financial goals.?

Thank you and we look forward to talking with you next Friday.

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