You’ll Be Shocked to See How Few Equity and Bond Funds Have Risen for 14 Straight Years
Six years. That’s the longest duration of time that U.S. equities have consecutively risen.
Since 1871, it’s happened only twice—once between 1898 and 1903, and again between 2009 and 2014.
Meaning, if the market is up by the end of this year, we will have crossed into uncharted territory—seven straight years of sustained equity growth.
While the possibility of setting a new record certainly sounds exciting, a quick glance at the chart above reveals what some could perceive as troubling news. A majority of the gainful blocks of time lasted only two or three years before dipping into the red. What the market giveth, the market taketh away.
Yet this is how the market (normally) works. One year it’s up, the next it’s down, and there’s money to be made in both directions. As Warren Buffett famously quipped, “I’d be a bum on the street with a tin cup if the market was always efficient.”
Indeed, you can make the argument that the market tends to do exactly that which displeases the most people. But just as a smooth sea never makes a skilled sailor, an ever-efficient market never leads to skilled investment management.
If you want to know what skilled looks like, check out the following chart:
What resembles the Manhattan skyline is actually the 14 straight years of positive returns in our Near-Term Tax Free Fund (NEARX). That’s more than twice the number of such years the general equities market has delivered.
Now get this:
According to Lipper, among 26,000 equity and bond funds in the U.S., only 70 have achieved the feat of giving investors positive returns for the past 14 years.
That equates to a scant 0.3 percent.
Here’s another way of looking at it:
As you can see, a hypothetical $100,000 invested in an S&P 500 index fund in December 2000 would have taken almost 14 years to catch up to and surpass a similar investment in NEARX.
Although we can’t guarantee how the fund will perform in the future, NEARX has historically shown an ability to dodge the dramatic swings and volatility in the equities market, similar to the ones we experienced during the first decade of the century—the dotcom bubble, for instance, and the Great Recession. And there will be times, of course, when products such as an S&P 500 index fund will strongly outperform NEARX.
But unlike the equities market, NEARX has a time-tested history of no drama. As the one has swung wildly this way and that, the other has calmly, confidently ticked up each year.
What’s more, NEARX continues to maintain its coveted 5-star overall rating from Morningstar, among 173 Municipal National Short-Term funds as of 12/31/2014, based on risk-adjusted return.
The equities market can at times be an incomparable place to make money, and we hope for another (and unprecedented) year of growth.
But for those who are looking for something a little less stomach-churning, there’s NEARX. Request more information here.
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Morningstar ratings based on risk-adjusted return and number of funds
Category: Municipal National Short-term funds
Past performance does not guarantee future results.
|One-Year||Five-Year||Ten-Year||Gross Expense Ratio||Expense Cap|
|Near-Term Tax Free Fund (NEARX)||3.07%||2.64%||2.98%||1.21%||0.45%|
|S&P 500 Index||13.69%||15.45%||7.76%||n/a||n/a|
Expense ratio as stated in the most recent prospectus. The expense ratio after waivers is a contractual limit through December 31, 2015, for the Near-Term Tax Free Fund, on total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest). Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.
Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Though the Near-Term Tax Free Fund seeks minimal fluctuations in share price, it is subject to the risk that the credit quality of a portfolio holding could decline, as well as risk related to changes in the economic conditions of a state, region or issuer. These risks could cause the fund’s share price to decline. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local taxes and at times the alternative minimum tax. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes.
The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)
Although Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper. Users acknowledge that they have not relied upon any warranty, condition, guarantee, or representation made by Lipper. Any use of the data for analyzing, managing, or trading financial instruments is at the user’s own risk. This is not an offer to buy or sell securities.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
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March 13, 2023