Fake News in Reporting of Italy’s Stock Market Downfall
Channel: Investing made easy
Date: 2017-04-14

Get our top 10 stock picks for free: https://o.obermatt.com/subscription/?utm_source=YouTube 
(Stock fake 1/3)

The newly coined term, “Fake News” has been all the rage since the US election. Lesser known is the fact that there can be “Fake Stock News”. The reports that one would have lost money in Italy with equity investments are not entirely accurate. The Milano stock market index, MIB, is a case in point (orange line in the chart). With a baseline of 100%, measured at the end of 2000, the baseline at end of 2016 was 46% (down from 42'758 to 19'566).  That appears be terrible performance and, therefore, investment in Italian stocks should be avoided.  But is that real or fake?

It’s fake because the MIB index number is misleading and unrealistic for investors!

The number is misleading because the dividends are not taken into account. This is the case with most stock index numbers, because the index values ​​would become too complicated with dividends. If you want an accurate measure, you have to calculate for "Total Return".  But, these values ​​are only provided by stock exchanges at your own expense, so you will rarely find them in the press.

The number is also unrealistic, because you do not invest all your money in the beginning and then wait for 20 years for your return. It’s more likely that the investments are spread out equally over the term. That’s how investments usually work in real life.

We made adjustments to the numbers and have displayed the results in bar form. The bar indicates how much the asset is worth when it is divided by the amount invested. The same amount is invested each year. If the bar is over the blue line, the value of the asset is higher than the investment, and vice versa.

So, if you started to invest in Italian stocks at the end of 2000, you were dissatisfied with the portfolio for two years because the value was lower than the investment. But, as early as 2003, the tide turned and investors were happy in the years following.
In 2008, the worst financial crisis of our generation, there was bound to be another negative year. And, more importantly for Italy, investors were only "under water" for the two years that followed and then again in the positive, despite a record of poor economic development.

Since then, the investor has earned 22% over the amount of original investment.  For those afraid of losses, the portfolio value was only negative in one year out of three.  The other years were good, sometimes very good.

This is all taking place in one of the worst countries for shareholders where the stock index has fallen by 54%. Despite the negative reporting, the average investor had a decent return on their investment.  This was clearly an example of “Fake Stock News”.

How we made our calculations: We have purchased relevant data from Standard & Poor's, ie, we do not calculate the return on our own, but are licensed by one of the largest financial data providers. In order to calculate the gray bars, that is, the overall portfolio value for an investor, who invests in large stocks of the country every year, we have taken the largest 20 stocks in the country for each year and calculated their return, plus dividends from Standard & Poor's. We then assumed that each stock has the same value in the portfolio account and then calculated the total return and the portfolio value at the end of the year. This is the closest approximation to a typical investor.  We have divided this amount by the sum of all annual investments. If the current value of the portfolio is higher than the sum of all investments, then the bar is over 100% and less than 100%, if there were losses.

Get our free Obermatt Stock Update (see sample): http://o.obermatt.com/activate_language/en/user_subscription

Entire playlist: https://www.youtube.com/playlist?list=PLXfpebax-e07ZzfWNERNCIXI57zkJuCWW
Subscribe to our Youtube channel: https://www.youtube.com/channel/UCBW5Ra7QNmPaWswKvSV8Weg?sub_confirmation=1
Follow us on
- Twitter: https://twitter.com/ObermattEn
- Facebook: https://www.facebook.com/0bermatt
- LinkedIn: https://www.linkedin.com/company/obermatt
Find out more about stock investing: http://www.obermatt.com/en/investing/investing-home.html
Check out our website for more information: http://www.obermatt.com/en/home.html

Disclaimer: Obermatt provides data to the best of our knowledge and belief.This post expresses the views of the author as of the date indicated and the information contained herein will not be updated. Obermatt claims no responsibility for the data presented or for any resulting implications of data usage, according to our disclaimer and liability statements: http://www.obermatt.com/en/investing/disclaimer.html.