“A new year is a fresh start. A good reminder to learn from the past, but leave it there. This clean slate is like grace...” - Dave Ramsey
Happy New Year! I am looking forward to checking in with you soon to review the current state of your financial plan.
Among other personalized considerations, we’ll look at how your investments performed in 2024 and make sure your strategy still aligns with your needs and goals.
January is always a good time to be reminded of some timeless truths about investing.
YOU CAN DO IT!
After a second year of double digit returns in the broad equity markets, I challenge long term investors to stay focused on a few things:
In the 4th quarter of 2024, we saw markets bid up in a speculative frenzy- thankfully some of that froth was taken off the table as the reality of a robust economy and stubborn inflation set back in.
While fear of losing money can cause investors to make emotional, regrettable mistakes, fear of missing out (AKA “FOMO”) can lead to some imprudent changes as well.
“Virtually no portfolio strategy more reliably produces worse returns than performance-chasing.” Nick Murray
“When human nature is in the grip of FOMO, it is bereft of common sense.” Nick Murray
Here’s the bottom line: I am always bullish about the long-term prospects of the great US companies. Outlooks for 2025 are positive, if not a little more muted than what we saw in 2023/2024.
After 25 years in this business, I have seen the timeless truths of investing proven over and over again.
There are two roads before every investor acting on a long-term plan for financial freedom:
- Invest in a broadly diversified portfolio of mainstream companies, rebalance regularly to buy low, sell high, and NEVER REACT, NEVER CHANGE, NEVER JUMP IN AND OUT, either by chasing returns, or trying to avoid volatility.
These investors understand that the growth of their investments was never meant to replace a prudent saving and spending plan- they don’t develop impatience or unreasonable expectations.
These investors have developed a discipline that grows into a bulwark against bad decisions, and so they build the kind of wealth that essentially immunizes them from financial failure.
- The other road, as often if not more frequently traveled thanks to human nature, is the path of fear and frenzy- selling low and buying high.
These investors think they know something about the future that the markets don’t, and make the wrong decisions at every opportunity. They seek to disprove Warren Buffet’s obvious and simple pronouncement that “the investor of today does not profit from yesterday’s growth.”
They place their hopes for wealth creation on risky speculation, and neglect to save sufficiently. Advisors consider sitting OUT of the market hoping for some good result to be another flavor of speculation.
These same folks, who sit on the sidelines trying to avoid some imagined upcoming calamity, are the same ones who want to pile into an expensive, undiversified strategy when the “MO” part of “FOMO” (missed out) becomes apparent.
If you are like most of my clients, and choose the first road, congratulations to you! Please spread the good word.
If too often you have been tempted onto the second road, my 2025 challenge to you is to leave past habits behind, and commit to staying on track for success from here on out.
Next month we’ll take a look at a few stereotypes that you may confront in 2025, that may test you!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.