Staying On Track
The area shaded light green in the chart below traces the hypothetical fate of a dollar invested in the S&P 500 between January 2008 and June 2011. This period spans the stock market's historic collapse, precipitated by the subprime mortgage crisis, and its subsequent rebound. A disciplined "all equity" investor would not have lost any of his original investment despite a harrowing three and a half years of turbulence. The dollar invested at the start, measured on the vertical axis on the right, would have recovered its value, at least in nominal terms.

Many investors lacked this discipline, and they paid a steep price. We have superimposed on this chart a dark green line that traces the cumulative net cash flows1 into (or more accurately, out of) U.S.-domiciled equity mutual funds during the same period. When the market collapsed fearful investors fled in droves and did not return, only to miss a vigorous recovery.

To remain disciplined, an investor must be sufficiently confident in his knowledge of capital markets to adhere to a rational strategy. That knowledge should be rooted in well-grounded empirical research. That's where we come in.

Also In This Issue
Quarterly Review of Investment Policy
Tax Swapping Time
The High-Yield Investment Strategy
Recent Market Statistics
The DJIA Ranked by Yield
Recommended Investment Vehicles