It’s that time of year again - prediction time.
What’s going to happen next year? As usual, I don’t know. How about you? I just finished reading Forbes Magazine’s end
of year Investment Issue and it didn’t help me come to any new conclusions.
Rats.
Now for some breaking news. For the first time this year, I’ll
be sending out a separate survey to those that frequently open my emails to see
what you (they) say to some speculative questions I intend to offer for their response. Of course, I’ll publish the results.
As we finish up this year going over many of our clients
investment portfolios for the second or more frequent times, we have come to
the conclusion, as we often do, that less is better - less changes, less explanation, less
understanding, and less acknowledgement that we can predict the future. Less is
better. How unique?
So how are our clients, collectively doing? Not bad.
Our clients are putting away more money since the two great dips of
2001-2 and 2008-early 2009. They are
also lamenting the continued softness of the stock and bond markets and the
continued sinking of housing values. I feel the same emotions.
By the way, our current favorite economic guru, Anirban Basu
of the Sage Group, says that housing deleveraging will take a decade, until
2017. (Sigh)
On the other hand, as a group our clients remain optimistic
for the long run. They are optimistic
that we can do it – whatever “it” might be. (Mr. Minick, my 8th
grade English teacher, please forgive the dangling participle.)
This is the point that I should now report that our clients
who retired during 2008-2010 have stated that they are doing “OK”. That surpassed our expectations. But the way, we can’t recall one client
having told us it was mistake to retire when they did these past three years.
(However, we acknowledge if they do regret it they may not have told us.)
It’s an election year coming up – surprise! You think 2011
was an up and down year? You just
wait. The media loves a horse race and
we will be having lots of them. We have
some international horse races going on too.
We predict the markets will over react in both directions. Don’t pay
much attention.
What can a long term saver and investor do? As I said in my first ever (August 2011)
urgent email, “turn off the TV”. You
might recall this was the first time in 9 years I felt compelled to send out an
“all hands on deck” email.
If you do want to ponder some thoughtful ideas and research
on the subject of why we do what we do and why we make so many mistakes, I’d
recommend Jason Zwieg’s “Your Money and Your Brain”, and Meir Statman’s “What
Investors Really Want”. Both of these
books have to do with our behavior as investors.
Many of you will recall, I’ve been
recommending Charles Ellis’ “Winning the Loser’s Game” 5th edition,
for the past year or so. If you buy, borrow or beg one of these books and don’t
think it’s of value after reading it, I’ll reimburse you whatever it cost. No
time limit on this offer to regular readers of this blog.
So that brings me to my list of concepts I’d like you to
consider exploring as we enter 2012:
·
The illusion of control
·
Confirmation
·
Hind sightedness
·
Patterns
·
Availability
You’ll find these concepts and more in the three books we’ve
just recommended.
So for 2012, we suggest you follow Warren Buffet’s advice to
just invest in index funds as much as you can.
I think John Bogle, founder of Vanguard, said that too. If you must invest in a limited number of
active funds in your work retirement plan, then try to find low cost and
diversity.
My wish for this holiday season is for both you and me to
have more family time and count our blessings each day. Thanksgiving was a good
start. Keep it up. I predict it will improve our year 2012.
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