Are some Fund investment classes too risky?
Stocks are the most volatile asset class and are high risk in the short run. But for long-run investors like the Permanent Fund, there’s actually a greater risk to be out of the stock market than to be in it. The long-term trend of stock prices is more steeply upward than that of other asset classes. Stocks advance in 6 out of every 10 years, in 72% of all 5-year periods and in 77% of all 10-year periods. One study looked at the 62-year period from 1926 through 1987. It showed that if an investor had been out of the stock market only during the 50 best market months (which would be only 7% of the total months in the 744-month time span), total return for the 62 years would have been zero, rather than more than 10% compounded annually had she stayed the duration. The Fund is now also invested in alternative investments, including private equities, hedge funds and public infrastructure. Gradual exposure to these classes will be in keeping with how the Fund has started out in stocks…ded
