Should we mortal investors stay away from the stock market in the wake of the S&P 500 Index' 11 percent plunge between Aug. 17 and Aug. 25?
No, says MarketWatch columnist Brett Arends
. "I’ve just thrown a whole bunch of my money at the stock market," he wrote Wednesday. And why is that?
- Nobody knows where the market is headed. "So sitting on my hands because I’m too worried makes no sense," Arends says.
- "I know can make a lot more money from the stock market than I can lose." Through history, equities have produced annual returns of 4 to 6 percent after inflation. "I fear that future returns may be at the low end. But that’s still better than a slap in the belly with a wet fish," Arends writes.
- Stocks have dropped around the world, creating a buying opportunity. "Many of them look pretty cheap on long-term valuation grounds," Arends says. He's purchasing stocks around the world, including emerging markets, resource and real estate stocks.
Hopefully he'll fare better than hedge funds. The stock slide has put the kibosh on those that were bullish on stocks.
Among the losers from the global stock plunge are star managers Leon Cooperman, Raymond Dalio and Daniel Loeb. Cooperman’s Omega Advisors suffered a 12 percent slide for August through Wednesday, according to The Wall Street Journal
Loeb’s Third Point and William Ackman’s Pershing Square Capital Management also have endured significant losses, putting them in the red for 2015.
“We’ve struck out this month so far,” one hedge-fund manager told the paper.
Journal reporter Rob Copeland notes the irony that as hedge fund managers have underperformed the stock market during its 6 ½-year rally, they offered the excuse that they were hedging the move, just as hedge funds were meant to do. It looks like many didn't hedge it too skillfully.
To be sure, not all fund managers screwed up. Stock hedge funds are down an average of 5 percent this month, besting the 7.8 percent decline for the S&P 500, according to HFR.
Still, given the stiff fees hedge funds charge, it's no wonder that performance like that is driving some major investors, such as Calpers, away from them.
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