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High Rate CD's Beat the S&P 500 - Short Term Investing That Dominated a Decade
By
Jay P S
Article Word Count: 270 [View Summary] Comments (0) |
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The notion that average high rate CD's with 6 month maturity would beat the performance of the S&P 500 is outrageous, and yet it has happened. When future investment management students look back at this period in financial history, they will stare in awe at how badly the stocks of the S&P 500 companies have performed.
Nothing I Was Taught Prepared Me for This Kind of Market
I was a financial student in the early 90s, and nothing I was ever taught would have led me to believe that the stock market's performance would be dominated by the performance of boring plain vanilla high rate CD's. The standard quoted risk premium of the S&P 500 was supposed to be somewhere around 8.4% over and above the risk free rate.
Be It Bad Economic Times, Money Mismanagement, or Fraud... Equities Markets Performed Terribly
Whatever reason we choose to assign for the abominable performance of equities markets in the time period of approximately 1995 through year end 2008, the results are undeniable. Investors who put their money in the stock market anytime after somewhere mid-year in 1995 would have been outperformed by high rate CD's or even simply stuffing it in a mattress.
What to Do Going Forward
What most stands out about the investing results from the last dozen or so years is that long term investing must not be done with blinders on. Simply handing money over to an investment advisor or mutual fund and expecting historic returns of 8-12% is a recipe for disaster. Prudence dictates alertness to market movements and increased short term investing.
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Here is a couple of performance charts of the returns of high rate CD's vs. the S&P 500. Note the rising returns in the 1993 period through about 1995. Be sure to check out other high yield short term investing alternatives where binary option yields range from 60-75% per hour. Jay P. S. Article Source: http://EzineArticles.com/?expert=Jay_P_S |
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Article Submitted On: November 03, 2009
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MLA Style Citation:
S, Jay P. "High Rate CD's Beat the S&P 500 - Short Term Investing That Dominated a Decade." High Rate CD's Beat the S&P 500 - Short Term Investing That Dominated a Decade. 3 Nov. 2009 EzineArticles.com. 23 Nov. 2009 <http://ezinearticles.com/?High-Rate-CDs-Beat-the-SandP-500---Short-Term-Investing-That-Dominated-a-Decade&id=3200931>.
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APA Style Citation:
S, J. P. (2009, November 3). High Rate CD's Beat the S&P 500 - Short Term Investing That Dominated a Decade. Retrieved November 23, 2009, from http://ezinearticles.com/?High-Rate-CDs-Beat-the-SandP-500---Short-Term-Investing-That-Dominated-a-Decade&id=3200931
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Chicago Style Citation:
S, Jay P. "High Rate CD's Beat the S&P 500 - Short Term Investing That Dominated a Decade." High Rate CD's Beat the S&P 500 - Short Term Investing That Dominated a Decade EzineArticles.com. http://ezinearticles.com/?High-Rate-CDs-Beat-the-SandP-500---Short-Term-Investing-That-Dominated-a-Decade&id=3200931