Yesterday, I set out on a mission to share a handful of startling statistics concerning the S&P 500's run-up to a new, all-time high. If you're still wondering why we should even care, consider that a heap of money tracks the S&P 500. To be exact, there is $2.7 trillion in open-end mutual funds and $187 billion in exchange-traded funds (ETFs) linked to the index, according to Morningstar. That compares to about $142 million in fund assets tracking the Dow.
I'm willing to bet that some of your hard-earned capital is included in those totals. In other words, you've got "skin in the game," so to speak. And that's a pretty good reason to take an interest in the topic at hand, if you ask me. So let's pick up where we left off yesterday.
Stock Stat No. 6: Stay Away From Solar!
Yesterday, I noted how we should be looking for momentum plays (i.e., the best-performing stocks since the market hit bottom). After all, trends tend to persist in the market. Well, the same holds true on the flip side, meaning we should avoid stocks that have shown lackluster performance since the market bottom. That's because they're likely to keep struggling.
And that brings us to First Solar (FSLR). It's the worst-performing stock, dropping 75% since March 2009. So much for the "sunny" prospects for solar stocks. (Let the record show, I did warn you here and here.)
Stock Stat No. 7: One Bad Apple Can't Spoil the Bunch
Since the Dow only tracks 30 companies, one or two stocks can heavily influence its performance. In fact, the 155% run-up for International Business Machines (IBM) from $83 in March 2009 to $213 today accounted for one-tenth of the Dow's total gain, according to Standard & Poor's Howard Silverblatt.
In contrast, the 500 companies in the S&P 500 can't exert such undue influence. Not even Apple (AAPL). The stock has slumped a staggering 37.2% since September 2012. (By the way, I told you so.) Yet the S&P 500 still marched to a new record high. Granted, if Apple's stock didn't head south, the S&P 500 would have set a new record on March 5, the same day as the Dow, according to Silverblatt.
Stock Stat No. 8: A Golden Perspective
No surprise here, given all the money printing being done by Fed Chairman Ben Bernanke. But if we priced the S&P 500 in grams of gold, we can see that it's nowhere near a peak.
Stock Stat No. 9: Don't Underestimate the Power of Dividend Reinvesting
It's official. The Dow and the S&P 500 have both recovered all of their losses since the Great Recession hit. Who said buy-and-hold investing was dead? And if you bought, held, and reinvested dividends, your portfolio would be in even better shape.
A $10,000 investment in the S&P 500 on Oct. 9, 2007, would be worth $11,270 today. So instead of being back to breakeven, you would actually be up 12.7%. Just something to keep in mind if you're thinking of bailing on stocks altogether.
Stock Stat No. 10: Far From a Rarity
For those of you who might be thinking it's time to cash in and move out of stocks just because the market hit a new record high, hold up! All-time highs aren't as rare as you might expect -- especially if we measure the total return of the S&P 500, including dividends (not just the price appreciation). When we do, the S&P 500 has actually been hitting record highs since April 2, 2012.
More specifically, the index hit a total of seven records last year and 26 so far this year, according to The Wall Street Journal's Market Data Group. I suspect the number is going to keep growing, too. So don't miss out.