We encourage investors to mostly look past annual returns and keep their eyes on the market’s long-term performance. But it can be helpful to consider annual reports too, as long as we do so within this greater perspective.
Speaking of perspective, there’s also global versus domestic viewpoints. The Dimensional Fund Advisors chart below, ranking 2017 return sources, illustrates why we continue to believe it’s best to globally diversify your risks and expected returns around the world. While the U.S. S&P 500 performed nicely in 2017, returning just under 22 percent, notice how many international markets did even better, with emerging markets significantly outpacing all the rest.
Of course, from one year to the next, the reverse can easily be true. So, to quote Nick Murray, an industry thought leader:
“We will never own enough of any one idea to make a killing in it. We will never own enough of any one idea to risk being killed by it.”
This is what diversification is for.