No Free Lunch

In order to earn the long-term returns that stocks offer, one has to put up with the sometimes discomforting volatility of markets. This past quarter provided an example of just that kind of discomfort.


The S & P 500 Stock Index closed the quarter ending March 31st at 2640, just a smidge below the yearend close of 2673 – not all bad after an increase of 21.8% last year. However, during the quarter, the Index reached a high of 2872 (up 7.4% from yearend) and a low of 2532 (a decline of 11.8% from the high). In spite of these price swings, if you were not reading the financial news or watching the markets daily, it was an uneventful quarter.


Price volatility in technology stocks was even greater, including shares of Facebook, Google and Intel to name a few examples. However, Technology does represent the fastest growing sector of the economy and deserves representation in most portfolios.


Bottom line: There is no free lunch. Volatility is a factor we are going to have to live with while investing in equities. Patience and courage are attributes that have rewarded long term investors. I believe that will continue to be the case.


After many years of easy Federal Reserve policy and declining interest rates, the Fed has reversed course, and interest rates have begun to rise. This should provide the opportunity to earn better rates of return on the fixed income and cash portion of portfolios.