By now, you’ve probably seen a few – or a few thousand– retrospectives on the past year and the past decade … with a few 20-year reflections thrown in for good measure.
It can be entertaining to reminisce about the year that just ended and guess at what the next 12 months may bring. But, as Jeff Sommer of The New York Times said, “It is the time of year for predictions and I’ll make one: You will be better off ignoring the Wall Street stock-market predictions for 2020.”
We couldn’t agree more. It’s natural to enjoy a few flights of fancy when year gives way to another. In fact, it can be a wonderful time to revisit, renew, or redirect the personal aspirations you most want to achieve in the years ahead.
But your investment outcomes depend far less on reacting to one or a few years and far more on embracing more durable insights. These are the insights that have been stress-tested across decades of market moves and have rarely changed from one year – or even one decade – to the next.
1. Trust that stocks have yielded more than bonds over time. A long-term perspective suggests this has occurred annually about two-thirds of the time.
Allocate some of your investments to stocks accordingly, and don’t waver in the years that don’t deliver.
2. Trust too that stocks won’t always outperform bonds. There’s that roughly one-third of the time that stocks’ annual returns have disappointed. And if there is a 2019 lesson to be learned, it’s that we cannot predict which years will fly or flop. We believe it’s safe to say hardly anyone foresaw such a strong, continued U.S. stock surge around this time last year.
To combat your personal doubts in the face of financial uncertainty, remain diversified across and within stock and bond asset classes, according to your financial goals, timeline(s), and risk tolerance.
3. Trust in the quiet power of controlling what you can and ignoring what you cannot.
It’s easy to start living in fear of the next downturn considering the 24/7/365 media. In his book Super Forecasting, University of Pennsylvania professor Philip Tetlock, PhD, describes the results of a 20-year study of nearly 300 professional “experts” and the accuracy of their 82,361 predictions about the future. He summarizes the findings this way, “Roughly as accurate as dart throwing chimpanzees.”
We wish you all good things in 2020. More than that, we look forward to guiding you through whatever the year has in store, partnering with you to convert your wishes into achievements.