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15 January, 2015

2014 - Patience Pays Off

The S&P 500 index in the USA is perhaps the world's leading stock index, and so how it behaves is both an interesting exercise in economics, and also critically important for the future financial security of many investors.  So it is perhaps surprising that despite the fact that a typical forecast would be for a return of between 8% and 10% per annum, there has been no single year since 1926 when the S&P 500 or its predecessor indicies have delivered a year of growth between these figures.  They have without exception been more or less than these numbers. 

Forecasting is of course a very difficult job - neither tea leaves nor the stars are much use in reality - although given the paucity of evidence for it being possible at all these two methods have at least as much claim to success as the rather dubious statistical methods most pundits use.  Here, Weston Wellington, Vice President at Dimensional Fund Advisers, offers his view on how 2014 really went, where the challenges are in delivering consistent returns, and whether trying to react to every global event is a recipe for success, or whether the best strategy is to simply remain invested for the long term.

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by John Stirling


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