15 Years of Investing

Over the next week or so, we are going to be commemorating our 15th birthday with team celebrations across our regional locations. We opened our doors as Hewins Financial Advisors, LLC on October 1, 1999 in Redwood Shores, CA, just south of the San Francisco International Airport. What a 15 years it’s been! We are enormously proud of the firm we’ve built and the work we do with clients. But the markets haven’t always made it easy.

Throughout the lifetime of our firm, we’ve experienced two bear markets, the 9/11 attacks and aftermath, the financial crisis and the Great Recession of 2007-2008 (plus the Euro crisis that followed), wars in Afghanistan and Iraq, and now back to war in Iraq and Syria as well.

1999 seemed like a propitious year to begin. The market started out strong, providing a tailwind for our clients’ assets and our business. One year in and all major equity asset classes had advanced, led by a 23% gain in small-cap stocks. Then, the dot-com bubble burst. By the time we hit our third birthday on October 1, 2002, we were looking at double-digit losses in the major equity indices on an annualized basis, with the S&P 500 down 12.9%.

However, our 15 years have also encompassed the last half of a powerful bull market for bonds, which started when interest rates peaked in 1981. While equities tumbled over that first three-year period, bonds (as measured by the Barclay’s Aggregate Index) turned in a 9.48% annualized result. Think about that — just how powerful has this bond market rally been? From the firm’s inception in 1999 to August 31, 2014 — just under 15 years — bonds have risen a cumulative 127%, more than U.S. large-cap stocks (107%) and more than international stocks (+84%).

Chart: Generated by Performance Evaluation Program (PEP) for Windows, Callan Associates Inc.; used with permission.

In October 2007, the S&P 500 finally crawled back to surpass its 2000 high, just in time to experience the worst stock market crash since the Great Depression, with a 57% decline from its peak to its trough in March 2009. It has been almost all uphill from there, with the S&P 500 surpassing its 2007 high in January 2013 and hardly looking back.

These 15 years have offered up some interesting lessons from both an investment and business perspective. Just to name a few:

1. Emerging markets have been an important story of the past 15 years. At the beginning they represented about 3% of global market cap, but those markets grew to 15% of the global total in 2011 (and now about 11% after the recent decline). The 312% gain over that time is almost triple the gain of the S&P 500, as those countries experienced GDP growth well in excess of the developed world. The chart above shows the volatility that has accompanied that.

2. Diversification, diversification, diversification — the power of which was on full display over our 15 years. Remember the “Lost Decade”? The story on our 10th birthday in 2009 wasn’t nearly as rosy as it is today — the S&P 500 had a negative return. We may have experienced a lost decade for the S&P 500, but as the chart above shows, that was not the case for small-cap and emerging-markets stocks, or for bonds. Investors with broadly diversified portfolios continued to build wealth despite the flat performance of a typical large cap domestic equity-only portfolio, in contrast to popular perception.

3. “Time period” — not “timing” — is everything. Long-term expected returns are just that. Even 10- or 15-year periods can deviate from long-term expectations. Performance is end-point dependent and can look very different with just a few quarters’ change.

4. Which makes it even more important to look beyond short-term fluctuations and fight “recency bias,” the tendency to extrapolate today’s situation and recent events out to the future. It is hard to overestimate just how strong that pull was for our clients in the depths of the financial crisis. Even the most seasoned among us struggled through 2008 and early 2009, as each day seemed to bring more bad news than the day before. But the market turned around very fast, and those that stuck with their plan and resisted the impulse to capitulate saw their portfolios recover with a vengeance. Such is the nature of markets.

We have found that education — early and often — is the best antidote to getting caught up in the euphoria of bull markets and dragged down by bears. Today, we are privileged to be working with many of the clients who started with us 15 years ago and embraced that critical lesson. That should serve us both well for the next 15!


Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at www.adviserinfo.sec.gov. Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
OneBite Editorial Staff

OneBite® is a Top 50 Financial Advisor Blog powered by Wipfli Financial Advisors. Founded in 2011, the digital magazine is dedicated to providing intelligent, in-depth coverage and analysis of the top financial and economic issues facing investors today.

No Comments Yet

Comments are closed

15 Years of Investing

time to read: 3 min