Michael,
I am not focusing at the current bull market at all (but maybe you are focusing on specific bear market segments?). I am focusing on the long term, on average, over bull and bear markets, which is where any sort of statistical analysis make sense (and is more practical too, from a life-cycle investment POV). A very simplistic analysis will show that if if historically money funds less 10% beat the market by the same percentage 30% of the time as it was beaten by the market 70% of the time, then on the average the market has beaten money funds less 10%.
Now of course one needs to find out the exact percentages to do the actual calculation. But, given that the market always has a risk premium, this indeed is the case, otherwise since money funds are guaranteed and the market is not everybody would invest in the money funds and nobody in the market, hence market prices would fall and returns rise till they are more than money funds in absolute terms and comparable in risk-adjusted terms. I am sure you know all this, but I am re-iterating for the sake of elucidating the argument.
IOW, finally we come back full circle. Returns need to be adjusted for risk to make any comparisons meaningful.
-BGR. |
