Articles for Financial Advisors

Invest in Second Best

Invest in Second Best

According to 2012 research by The Leuthold Group, investing in last year’s 2nd-best performing asset category is the “optimal price-based strategy, and has been over the last 40 years.” Based on this strategy, for 2013 advisors should be recommending the MSCI EAFE, which returned 18% in 2012 (vs. 20% for NAREIT Index). Looking at S&P 500 sectors, consumer discretionary stocks should be purchased for 2013 since they returned 24% (vs. 29% for financial stocks).


As shown in the table below, investing in the previous year’s second-best performing asset class has yielded a 15.6% annualized return since 1973, compared to 7.6% for the worst performing asset class (from the previous year).


Invest In Last Year’s Performance Rank  [1973-2012]


Asset Class

Annualized Return

Best Performing


2nd Best


3rd Best


4th Best


5th Best


6th Best


Worst Performing


S&P 500



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