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 |
14.0% |
|
2nd Best |
15.6% |
|
3rd Best |
8.0% |
|
4th Best |
13.0% |
|
5th Best |
3.9% |
|
6th Best |
3.8% |
|
Worst Performing |
7.6% |
|
S&P 500 |
9.8% |