Returns for this Decade

I was responding to a question this weekend where I went into my normal soapbox speech about being in the right areas of the market at the right times and how you don't simply change based on the changing of the calendar as most standard asset allocation pie charts direct you to do. Your standard asset allocation pie would have you overweight large cap stocks (as in the S&P 500) and underweight small cap, international and emerging market stocks with that differential growing as you move along in age. Their argument is that large caps are less risky and that small caps are more risky.

Below I show how certain areas of the market have done this decade using their corresponding ETFs as a proxy. The two worst areas have both been in the large cap space: the S&P 500 is down -26.69% since Jan 1 2000 and the NASDAQ 100 which is down -53.41%. That means that in the next 15 months the S&P has to go up almost 27% just to break even over the past 10 years.

I don't know about you, but to me the real risk in investing is the risk of losing money in which case large cap equities have been the most risky not the least risky.

S&P 500 (SPY)	-26.69%
NASDAQ 100 (NDX)	-53.41%
S&P 600 Small Cap (SML)	63.48%
MSCI EAFE (EFA)	-5.83%
MSCI Emerging Markets (EEM)	124.22%
Money Market	30.04%
Lehman Aggregate Bond (AGG)	41.43%