Investments

According to a May 2013 WSJ article, the total amount of NYSE margin debt at the end of March 2013 was 2.7% of the total market capitalization of the S&P 500. At its previous peak, investors had borrowed as much as 2.9% of the S&P 500; at its crisis low, investors were borrowing 2.3% of the S&P 500’s market value.

The 60/40 (S&P 500/long-term government bonds) portfolio, rooted in modern portfolio theory, was first popularized in the late 1950s. Starting in the 1900s, the average annualized return of a 60/40 mix has ranged from 3% (1910s) to over 14% (1980s and 1990s) over the past 10 decades.

60/40 Portfolio: Average Annualized Return

The Dow Jones All Equity REIT Index tracks 136 REITs. As of the beginning of 2013, this index had a 3% dividend yield. The DJ sectors that comprise their REIT index had the following 2012 returns:

Master limited partnerships (MLPs) can offer the investor an attractive income stream plus tax benefits. Tax on 80% of distributed income is deferred (until partnership shares are sold); the investor pays ordinary income taxes on the remaining income. Each year, partnership investors must fill out Form 1065 (Schedule K-1) to declare partnership income. MLPs pay out 5–6% a year and are projected to also enjoy 5–6% annual appreciation (source: Morningstar).

Master limited partnerships (MLPs) are popular because of their high payouts that qualify for favorable tax treatment. The Alerian MLP Index (symbol AMZ) cannot be invested in directly, but the JPMorgan Alerian MLP ETN tracks this index (symbol AMJ). As of March 2013, AMJ had a 4.7% dividend vs. 2.0% for the S&P.

At the end of WWII, while most of the world lay in ruin, the U.S. accounted for 25.6% of the planet’s industrial output. By 1970, America’s global manufacturing share stood at 22%—where it has remained for the past four decades. The 22% figure also means that the U.S. still represents the world’s largest manufacturer.