Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Bio
X •  LinkedIn
 

  Don’t Abandon Diversification Because Of A Bad Experience
Posted Under: Broader Stock Market • Commodities • Conceptual Investing
Supporting Image for Blog Post

 

  1. The time periods referenced in the chart were selected specifically to capture two rallies in the price of crude oil with each period sharing a starting price of $80 per barrel.
  2. Crude oil rose from $80 to a record-high level of $145 from 9/26/07-7/3/08. The price increased from $80 to around $97 from 9/26/11-8/21/12.
  3. Despite the fact that oil surged approximately $65 per barrel from 9/26/07-7/3/08, the refiners actually saw their stocks plummet by an average of 47.4%.
  4. As a result, the return on the broader S&P 500 Energy Index was only 10.7% in that period. The returns on the remaining subsectors ranged from 4.8% to 48.8%.
  5. Fast forward to 9/26/11-8/21/12 and you see where the price of oil increased $17 per barrel. This time, however, the stocks of the refiners were up 67.9%, on average.
  6. As a result, the return on the broader S&P 500 Energy Index was 20.3%, nearly double the return posted a few years earlier when oil rose nearly 4 times as much in price.
  7. The refiners outperformed the other subsectors, which posted gains ranging from 10.6% to 22.9%.
  8. Diversification works. And while aberrations occur from time to time, it's best not to overreact to them, in our opinion.
Posted on Thursday, August 23, 2012 @ 12:06 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
•Market Commentary Video
•Monthly Talking Points
•Quarterly Newsletter
•Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
• The More The Merrier
• Investors Continue to Chase Yield
• There Is Always A Lot Riding On Presidential Elections
• Some Sectors Are Becoming More Global Than Others
• Getting on Board
• The Not-So-Terrible Twos
• Sometimes You Get What You Pay For
• The Next Stop After Sector Investing Is Subsectors
• Bigger Is Once Again Better
• Don't Get Mad...Get Even...Or Better
Archive
Skip Navigation Links.
Expand 20242024
Expand 20232023
Expand 20222022
Expand 20212021
Expand 20202020
Expand 20192019
Expand 20182018
Expand 20172017
Expand 20162016
Expand 20152015
Expand 20142014
Expand 20132013
Expand 20122012
Expand 20112011

Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.