2013 Year In Review

It is likely that 2013 will go down in the books as a very good year for the markets.  As of December 13^th, the S&P 500 Index (a US market index) was up over 27%.  The international markets were also up, with the MSCI EAFE Index returning over 16%.  Most investors are pleased with these results.  However, it is at times like these that questions begin to be raised:

 

“What do you think the markets are going to do now?”

“Aren’t the markets really high?”

“When is the correction coming?”

 

It is impossible for anyone to tell what direction the market will go.  I can recall specific instances, even back in January of 2012, of people saying that they were going to stay out of the market because it was “too high”.  Those same people have missed out on the gains that have since occurred.  It is impossible for anyone to tell which direction the next 10, 20, 30 or even 40% move in the markets will go.  It could be up, it could be down. 

 

There has never been a 100% decline in the global stock market- and if it would occur, the state of your investments would (likely) not be your greatest concern.  After all, such an event would have to wipe out the entire value of all companies, all over the world.  By contrast, if we examine the historical record, 100% increases, over varying time intervals, have certainly occurred.

Remember that the day to day, week to week, and month to month market movements are largely  random.  In our world of instant gratification, investors need to learn to ignore the minute by minute market news given by media sources.  By weathering the volatility of the markets, long term investors who are disciplined ensure they are fully invested when the market makes a true and meaningful move upward. On the contrary, many undisciplined investors try in vain to time the market to avoid losses and lock in gains; but in reality the record shows this mostly leads to frustration, regret, and missed opportunities.  But like many things in life, the rules to successful investing are easy.  It's actually adhering to them that is difficult.