The financial markets thus far in 2014 are hinting at uncertainty after a robust 2013, which could lead to more volatility and deep losses if you are not prudent with your money.
The bond market fell prey to higher interest rates last year, as losses across the board of maturities perhaps were downplayed or glossed over due to the superb +25% gains in most stock market averages.
Meanwhile the play on the precious metals worsened as the year unfolded, Gold lost $450 per ounce, and silver much more (-35%) on a percentage basis. That broke Gold's 12 year run of positive returns.
You see, because of how we are wired, we will feel worse off by giving back gains if prices fall, than you would feel if you had not participated in the markets or sectors that performed nicely. You perhaps can stomach not owning more stocks because you're not a risk taker, and can't sleep with being 100% in the market. That's oaky and prudent, but do not surrender gains in stocks and bonds, hoping to recoup those profits holding on. An interesting stat is that long term bonds have lost price (total return) in more years than stocks since 1971, 11 times vs. 10. Sure the bond losses have been sanguine in comparison, but it was still a loss.
2014 is just one-month old, but the trend so far seems to favor the bonds and precious metals. Gold has jumped $40 an ounce this month, or +3%, while silver is about even. Widely diversified bond ETF's such as LQD and AGG are ahead +1.5% as the month closes in a few hours, not including the dividends to be paid next month. Not bad. And with the flurry of high tech earnings announcements out this week, Apple, Amazon to name two; their shares are cratering and taking down others in their path. The Dow 30 components suffering so far in '14 include oil (Chevron, Exxon), inurance (Travellers), along with 3M Co., and Proctor and Gamble, off 5% to 9%. Just 7 Dow 30 Average stocks trade with gains thus far in 2014.
I would surmise (not a prediction) that the best may be behind us for stock market gains short-term. So how does that help you? Be vigilant and stick to your plan - or develop one fast. Upgrade your stocks or mutual funds for better performing selections, determine your allocation in stocks and bonds that will allow you to sleep well. Watch the charts for cross-over and stops. Don't let emotions be part of the decision-process. That rarely works to your benefit.
If you're not sure how to get this going, give a call or reply to this blog. I'll show you how to set up a system to help you manage your important money in good times and in bad.
Chartered Retirement Planning Counselor
Fort Lauderdale Florida
Friday, January 31, 2014
2014's Uncertainty Cautions Diversification, Gameplan
Posted by Barry Unterbrink at 1/31/2014 01:13:00 PM
Barry Unterbrink is a fee-based Chartered Retirement Planning Counselor and wealth manager. He and his father, Larry Unterbrink, have experience as portfolio managers for institutional pension funds totaling $100 million, Investment Advisory Presidents and financial newsletter publishers. See http://www.stetsonwealthmanagement.com for more information.