We all have certain rituals for the end of the year. Some of us make contributions to charity. Others take down the Christmas decorations. Yet others light bonfires and bathe in the blood of an oak tree. It’s all a way to mark the end of yet another rotation around the sun, and celebrate a new one.
Those of us who write about personal finance like to look back on the year’s market performance, which, unlike detonating fireworks over the neighbors’ roofs, is legal in all 50 states. And the basic takeaway this year was that it could have been worse. As of yesterday, the Standard and Poor’s 500 stock index was up 3.08%, assuming reinvested dividends.
Boring, yes? Yes. But still a better return than the average money market fund — 0.02% — and intermediate-term corporate bonds, which returned 1.08%.
The top-performing funds had two things in common. First, they avoided energy, which fell more than 20% for the year. Of the 10 top-performing diversified U.S. stock funds in the Morningstar database, not one had any exposure to energy.
The other: At least some exposure to the MAGS — Microsoft, Amazon, Google and Salesforce. Polen Growth Institutional (POLIX), the current top-performing diversified fund with a 16.8% gain this year, has about 8% of its assets in Google. Brown Sustainable Growth (BAFWX), up 15%, has Amazon as its largest holding. Prudential Jennison Select Growth, up 14.5%, has Amazon, Google and Salesforce.
All of which will tell you nothing about what will work in 2016, a year with an unusual number of variables: A presidential election with no incumbent, the first year of rising interest rates since your bond manager graduated college, and some of the lowest commodity prices since the Taft administration. It should be an interesting year.