This is the fifth consecutive year I’m publishing a list of New Year’s resolutions for investors. The list started in 2012 with just eight resolutions and has now officially doubled.
Given the growing length of this list, I’m going to avoid discussing what the market looks like for next year. I did a post for The Wall Street Journal’s Experts blog about what I see, for those of you who are interested.
What I will say, however, is that before putting much weight onto anybody’s 2016 forecast, consider two things. First, as humans, we desire certainty. Forecasts give the appearance of certainty in an uncertain world even though strategies and pundits lack soothsaying skills. Secondly, consider what happened with oil, bonds and corporate earnings this year (2015). As I write this just before Christmas, a barrel of oil was trading in the mid-$30s—a much lower price than expected. Ten-year Treasury bonds are yielding 2.2% right now, instead of having risen to 3%. To paraphrase Mark Twain, reports about the forthcoming death of bonds have so far been greatly exaggerated. On January 1, 2015, Thomson Reuters said the consensus called for S&P 500 earnings to grow by 7.4% in 2015. On December 21, 2015, the consensus predicted a decline of 0.8%.
One last point before I start with the resolutions. Realize that just as it’s easy to think you’re good at investing when things are going your way, it’s also very tempting to change strategies when things aren’t going well. In between is the reality that the long term lasts beyond the period of time that our emotions are willing to consider. Strategies with good long-term performance will falter from time to time. Risky strategies and those with subpar returns will look great when conditions are favorable to them. The key is to avoid being lulled by the events of today and stay laser-focused on the long term. It’s not always easy to do, but it is vital to your success as an investor.
So, rather than orient your portfolio based on what you think might happen, follow these investing resolutions (which I have updated for this year).
More on AAII.com
- Spaceship Earth – AAII president John Bajkowski reflects on the importance of a global worldview for investors.
- 5 Steps for Gaining Control of Your Investments and Avoiding Mistakes – Simple actions you can take to focus on the things you can control.
- The Portfolio Review: Why It Is Important and How to Do It – Regular portfolio reviews are the foundation of successful investing; here are suggestions on how to do it.
- What Are Your Investing Resolutions for 2016? – Tell us on the AAII.com Discussion Boards.
AAII Sentiment Survey
Because our offices are closed today, the most current results were not tabulated at the time I wrote this email. They are now available on the AAII.com Sentiment Survey page. (We tabulate the Sentiment Survey results each Wednesday at 11:59 p.m.). More about this week’s results.
What’s Trending on AAII
- Why Buy Bonds If Interest Rates Will Rise?
- Bond Strategies for Those Fearful of Inflation
- The Individual Investor’s Guide to Personal Tax Planning 2015
The Week Ahead
The U.S. financial markets will be closed Friday, January 1, in observance of New Year’s Day, but are operating on normal hours December 31. Our offices are closed Thursday and Friday this week.
Four members of the S&P 500 will report earnings next week: Monsanto Company (MON) on Wednesday and Bed, Bath & Beyond (BBBY), Constellation Brands (STZ) and Walgreens Boots Alliance (WBA) on Thursday.
The week’s first economic reports will be the December PMI manufacturing index and November construction spending, both of which will be released on Monday. Wednesday will feature the December ADP employment report, November international trade, November factory orders, the December ISM non-manufacturing index and the minutes from the December Federal Open Market Committee meeting. December jobs data, including the change in nonfarm payrolls and the unemployment rate, will be released on Friday.
Chicago Federal Reserve president Charles Evans will speak on Thursday.
If you are an AAII member and haven’t signed up for the weekly Investor Update email, you can do so by going to the “My Account” area of AAII.com and clicking the “Update My AAII Emails” link. There you can subscribe to the AAII Investor Update email. If you are not an AAII member but want unlimited access to AAII’s library of educational articles, model portfolios, asset allocation models and many other member benefits, simply take a risk-free 30-day Trial AAII Membership to start becoming an effective manager of your assets.