Anyway, the new list is out.

Number one on this year’s list is Exxon.

The Fortune 500 ranks companies based on revenues. Exxon had $45.3 billion in revenues last year, beating Walmart’s $44.7 billion (Walmart was no. 1 last year).

As a side, this is the first year I have read the list on my iPad. I have to say, it’s pretty cool.

Compare that to Apple’s chart over the same time period:

What happened to Research in Motion?

I think…

1. They got complacent. They didn’t take Apple’s iPhone seriously.

2. They didn’t think ahead. Every phone they have come up with seemed to be playing catch up to every other phone.

3. The Playbook was a joke.

I still like BlackBerry. I have a Torch. Other than a few glitches, it has been a good phone. I’m resisting the iPhone because EVERYONE HAS ONE and I like to be different (even if it means I have an inferior phone).

S&P 500, MidCap 400, SmallCap 600, and Other Indexes Total Returns (April 2012)

So, what does that mean for performance?

Well, there’s not a lot of data available but I did find returns going back to 2009. Like I said, there’s not a lot of data available. I did find some exchanged-traded funds that have been around nearly ten years. I’ll see about running the numbers on them.

Anyway…

Here are a couple of charts I put together comparing the S&P 500 Equal-Weighted Index TR with the S&P 500 Index TR. As you can see, the Equal-Weighted index handily outperformed the standard index (at least in beginning part of the data).

I’m looking forward to seeing how the exchange-traded funds that track the equal-weighted indexes performed. Stay tuned…

As I mentioned yesterday, I have monthly total return data for BOTH the S&P 500 Index and the Barclay’s Aggregate Bond Index going back to January 1991 (I have S&P data going back to 1926). I thought it would be interesting to look at how much a person could have accumulated over the last 21 years had they been able to invest their social security contributions on their own.

The results were somewhat surprising.

According to my numbers, the portfolio that offered the highest end value was the one invested 100% in the Aggregate Bond Index: SS Invested in S&P 500 with Bonds (1991 – 2009).

Actually, when you consider the way the market has gone over the last 20+ years, it’s not surprising that the bonds outperformed stocks from a dollar cost averaging standpoint. Why? For one, when you’re investing a small amount of money over a long period of time, it’s best for the market to trend upward slowly so that you can accumulate more shares at the beginning, which will increase in value as the market increases. What we saw in the 90s and 2000s was a massive run-up followed by a massive drop.

Anyway, were social security contributions your money, and you maxed out those contributions over the last 21 years, you (and your employer) would have contributed $176,779 (I’m only counting the portion that goes towards social security, not disability). Your account balance would have been somewhere in the neighborhood of $322,000 to $335,000 (depending on your chosen asset allocation). And…that’s only for the last 21 years. Most people work much longer than that. So, it’s not out of the question that the account would be worth $450,000 or more over a thirty year (or longer) career.

Now some may look at those numbers and think that what social security is offering is a better deal. Here’s the thing: there is no free lunch! If social security is paying out more than a person could have earned investing in stocks and bonds, then that tells us the program is based on taking from the current earners to pay the current recipients. It’s “fine” as long as there are a greater number of employees contributing than there are retirees receiving. Not only that, if you did max out your social security contributions over the last 21 years, the government most likely will consider you rich and will take back a portion of your social security payment by taxing them.

So take a look at the PDF I put together and let me know what you think. Is there anything else you would like to see?

NOTE:Also, if you have monthly total return data for the Aggregate Bond Index that goes back farther than 1991 (and you’re willing to share), please let me know. It would be cool to be able to run different scenarios using more data.

I have monthly total returns for the S&P 500 (S&P 90 prior to February 1957) going all the way back to January 1926. However, I only have the Barclay’s Aggregate Bond Index (formerly known as the Lehman Aggregate Bond Index) going back to January 1991.

Anyhow…

I thought it would be interesting to look at different portfolio allocations and see how they would have performed from 1991 through 2011. I assumed a beginng balance of $100,000 and annual rebalancing at the end of each year. I started out with 100% stocks and no bonds and then decreased the stock allocation by 5% while increasing the bond allocation 5% until I got to 100% bonds. You can download a PDF of my findings here: S&P with Bonds (1991 – 2011).

What I found interesting was the portfolio that brought the biggest balance at the end of 2011 was the 95% stocks/5% bonds. Not only that, it delivered a better return with slightly less volatility—as measured by the monthly standard deviation.

Another interesting finding was how well the 70% stocks/30% bonds portfolio did. Take a look at the charts for the 100% stock portfolio and the 70/30 portfolio:

As you can tell from the charts, the 70/30 had significantly less volatility than the 100% stock portfolio. It captured 97% of the all stock allocation but only experienced 70% of volatility* (again, measured by monthly standard deviation). It seems like a reasonable trade-off to me.

But, that’s not the only way to look at it.

Another way to look at it is to look at potential retirement income. For instance, let’s say you want to withdraw 4% of your account balance upon retirement. Here are the different income amounts based on the ending values of the portfolios:

It’s important to note that past returns aren’t predictors of future results. That’s something to keep in mind when deciding on how to allocate your portfolio. I tend to be more on the aggressive side with our retirement portfolio but these findings are making me rethink my strategy. That said, I can accept more volatility now for hopefully higher income at retirement.

Thoughts?

*To arrive at that number, I simply divided the monthly standard deviation for the 70/30 portfolio by the standard deviation for the 100% stock portfolio.

Here are the year-to-date total return numbers for the S&P 500, S&P Midcap 400, S&P Smallcap 600, MSCI EAFE, MSCI ACWI ex US, MSCI Emerging Markets, Barclay’s Aggregate Bond Index (formerly the Lehman Aggregate Bond Index), Oil, and Gold.

I’m thinking of adding the returns for the corresponding exchange-traded funds so we can compare the results. Thoughts?

Taking Stock: Don’t be the “Dumb Money”

You’ll notice that there are a lot more one-month negative streaks than positive streaks. Looking at the data, I noticed that during longer streaks of positive returns, there might be a couple of one month periods of negative returns. It’s also interesting to note that the longest negative streak is 9 months (-32.78% over that 9 month period) and that it only occurred one time (January 1974 – September 1974).

The longest positive streak was 15 months from March 1958 through May 1959. The S&P returned 50.10% over that 15 month stretch.

I’m working on a follow-up post that will look at the returns during these streaks. Stay tuned…