Second Quarter 2012 Investment Perspective: Chart of the Quarter

Despite media attention, current events in the investment world typically have very little impact on long term values and returns. The value of an investment is equal to the present value of its cash flows. Today (current period highlighted above), the present value of dividends for the U.S. stock market over the next 10 years represents less than 20% of the total value of the market ($240 of a total $1,350). If dividends over the next 10 years were cut in half, the expected return for the market would only drop marginally from 8.2% to 7.9%. If dividends in perpetuity were reduced by 33%, the expected return would drop from 8.2% to 5.8%. This is material but still far surpasses the less than 2% return of nominal bonds today. While it is important to be aware of current events and to consider how they might influence the value of an investment, in most cases the near term focus and attention has more of an impact on short term volatility than it does on the long term fundamental value and return of an investment.

On a quarterly basis, Hirtle Callaghan publishes our perspective on the current market.  We have included the first page of that piece here.  If you would like to receive the full perspective, please contact us.

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