As I considered an essay to conclude 2014 and begin 2015, a few concepts kept recurring:
- The importance of having a consistent philosophy.
- The value of being consistent.
- Focusing on things that matter and things that you can control.
The past year has again shown that our consistent investment philosophy is strongly holding up to the long term test of time. We structure client portfolios to be very diversified by utilizing stock funds which are very low-cost, tax-efficient and which have excellent track records, due to their consistent methodologies.
By being globally diversified across many industries and countries, as a matter of philosophy, we do not place huge bets on individual companies, the direction of interest rates, or specific commodities, like the price of oil or gold. We have been very consistent that an approach like that, to make significant predictions and investment bets, is not in our clients’ best interest. That type of investing will not help you reach your goals or sleep well at night.
Most financial “experts” and economists were again totally wrong with their 2014 financial predictions. According to a Wall Street Journal article* recapping their annual economic forecasting survey, the average forecasts of the 49 economists (from major Wall Street firms, academia and other institutions surveyed) were way off on most of their predictions. Here are some of the most important items, as predicted in early January 2014, for 12/31/14:
- Interest rates, defined as the 10 year US Treasury yield:
- Prediction: 3.52%
- Actual: 2.17%
- Crude oil per barrel:
- Prediction: $94.65
- Actual: $52.96 (as of mid-day on 12/31/14)
- Payroll Growth:
- Prediction: 200,000 average monthly change over 12 months
- Actual: 241,000 through November, 2014, 11 months
If you or another financial advisor had made investment decisions based on this guidance, it would not have helped you. These top economists at were not able to accurately predict the future. One of our core beliefs is that we cannot predict the future, which we have often stated to clients and prospects, as well as in these blog posts. That is an important component of our consistent investment strategy, because we do not believe anyone can consistently predict the future over a long period of time.
Relying on predictions and financial guesses is not going to be a winning strategy.
So as 2015 begins, we hope your financial resolution is to be consistent, and to focus on the things which both matter and which you can control. If you do have things in your life which need your attention, which do matter and you can control, we hope you take action on them.
We strive to do this for our clients, our firm, as well as ourselves.
* WSJ.com: What the Economic Forecasters Got Right – and Wrong – in 2014 (12/31/2014)