As 2014 enters into its final month for all major indices, this should be a good time of the year to reflect on the most important major lesson about investing. The lesson is to be certain that you have the appropriate time frame to take the risk associated with investing in a particular asset class. Time and time again, most average investors get caught up in trying to figure out the best time to exit the markets or enter the markets. This is challenging enough for the experts who are engulfed in this data every hour of every working day let alone going at it as an individual investor.
Check out these predictions from January 2014 from over 30 of the major chief investment strategists from various leading firms http://cnnmon.ie/1CvoVBd. On average, the peer group had the S&P 500 growing 6% and the year to date return of the S & P is almost double that number. They also had oil in the $105 to $110 a range with the lowest number from any one analyst being $80. We all know that as of today, oil has dropped far below that $80 number, a far cry from a $105 prediction. What’s even more interesting is that Bitcoin was actually on the list of predictions as a major index.
While the S&P 500 is at all-time high and oil in a precariously low price range, if these two asset classes belong in your portfolio and you have 10 years to invest your money, it isn’t something you should be overly worried about from a day to day perspective. Studies have shown for a long time that you can often be your own worst enemy when it comes to your portfolio. Be careful about getting influenced from the latest news article and assess what risk you can take, and how long you have to invest the money. Timing the markets will often blow up in your face.
What are some of the year end moves people should be making? And what shouldn’t they be doing?