The Truth About Passive Index Investing

By Byron Stead, Managing Partner of Broxton Capital

 

Feb 2020

An index investor's 20 year annualized return since 2000 is about 4%.   Currently the markets are trading at the same valuation as in 2000.   Notice while an index investor had a 4% annualized return over 20 years,  buying at these prices they had a negative annualized return for 13 to 17 years.     At any point in the 130 year history of the US stock market,  buying many stocks at these levels, an index investors historically will have a 0% annualized return or breakeven in 2033-2037.

 

We encourage you to pull up the funds at Vanguard and Fidelity that have 20 year track records and observe their 0%-4% annualized return since 2000 as well as the gut busting negative returns of -40% for a few years in the early 2000s.

 

Fortunately, for us, we're finding names we'd own in any market.    There many stocks that are off the radar with great value and exhibiting sequential quarterly improvements.

 

Everyone forgets that the markets are never anyone's friend.

 

 

 

 

 

 

 

 

 

 

 

What to Buy in the World's Most Expensive Market?

Below is the performance of Growth Stocks  (Red Line) and the performance of Value Stocks (Blue Line).  Throughout history this line always intersects.  Notice how Value Stocks had a great run from 2000-2008,  and the last 13 years Growth Stocks have had their day in the sun.   This line always intersects every 8-15 years.   In fact Value Stocks relative to Growth Stocks have never been cheaper.      Buy low, sell high!   The Value Stocks Blue Line are the type of stocks we love.   They usually come with a margin of safety, dividend yield, and trade as inexpensive as they ever have right now.    But literally no one  is buying the blue line type of stocks,  and they're the cheapest they've ever been.

 

 

 

 

 

 

 

 

Broxton builds durable portfolios with low Price/Earnings and high dividends.  And with a better current earnings yield than the S&P 500. 

 

 

 

 

Extended bull runs are an excellent time for portfolio checkups.    Know what you own, and email us for a free portfolio checkup!   We're passionate about value investing and helping you meet your retirement goals.

 

About Broxton Capital Advisors

Founded in 2006, Broxton Capital Advisors is an independent, registered advisory firm dedicated to providing our clients the best personalized investment management services.

  • Our primary business is the management of separate U.S. equity and fixed income portfolios for individuals, trusts, corporations, foundations and endowments.

  • Value Oriented Approach,  identifying undervalued positions.

  • Zero Commissions.

  • Personalized approach,  Management Team is easily accessible to clients.

  • 100% employee owned.

  • Both Managing Partners of Broxton each have over 25 years of experience and have been working together for over 20 years.

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