As 2015 draws to a close, many investors hope to gain insights on how the markets will perform next year. And the media doesn’t disappoint. Everywhere you look, you’ll find stories predicting things like the next big recession, which stocks will be the hottest, and how the Fed’s small interest rate increase could have a large impact on your life.
It’s natural to want to anticipate the future, but the truth is, no one can reliably forecast the market’s direction, or predict which stock or investment manager will outperform. Those who follow the latest market predictions often wind up stressed out and disappointed, with more losses than if they had just stayed the course.
So here’s my prediction for 2016: Slow and steady wins the race.
- Creating an investment plan to fit your needs and risk tolerance;
- Structuring your portfolio around dimensions of returns;
- Diversifying broadly;
- Reducing expenses and turnover; and
- Minimizing taxes.
One of the advantages of working with a fiduciary financial adviser (one who is obligated to place your interests first) is having someone to help guide you through the emotions of investing and keep you on track. A good adviser will question your assumptions, remind you of your long-term goals, and renew your focus on actions that add value.
While it’s easy for news outlets and market prognosticators to create sexy, click-bait headlines to attract viewers, their words are often more entertaining than newsworthy. Successful stewardship of your finances requires discipline and patience over the long term, not just the 24-hour news cycle. If things seem bad now, know that nothing lasts forever. Acknowledge your emotion, recognize it for what it is, and instead of reacting, focus on the meaningful investment tactics that will reward your patience over time.
Remember: It doesn’t really matter what the markets will do in 2016. What matters is what you will do. How will you focus on financial stewardship in 2016?