The Case for Equities – Morningstar 10-29-12

Salient to Investors:

Jim Goff at Janus writes:

Only invest money you won’t need for five to 10 years, set it and forget it. Australia has the best such plan with its mandatory retirement fund contributions of 9% of salary – assets now exceed Australian GDP and the Australian stock market.

Bad headlines are the friend of long-term investors. Outflows from equities into bonds since Lehman have been of historic proportions, and will end badly for investors. US Treasuries have provided two percent real returns over the past 80 years, so 10-yr US Treasuries yielding 1.5-2% will produce negative real returns if inflation returns even to modest levels.

Stocks have recently rallied on good but unsurprising news, indicating investor pessimism – it does not take too much good news for stocks to rise.

Investors should first do no harm… by swapping out of stocks after the market has fallen or after even a short rallyThe average investor is far from contrarian. Fayez Sarofim said nervous energy is a great destroyer of wealth.

Both retail and professional investors follow crowds despite rarely being a tenable investment strategy. 

Read the full article at http://news.morningstar.com/articlenet/SubmissionsArticle.aspx?submissionid=157126.xml