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Investing in 2013 – Is it Different This Time?


The New Year has started out with a nice opening day rally in the markets, following a strong rally on the last day of 2012.  In all the Dow Jones Industrial Average is up 3.7% over the past two trading days.

Longer –term, the S&P 500 index was up 111% from the lows on March 9, 2009 through December 31, 2012.  With the solid rise in the markets on the first trading day of 2013, the index closed at 1,462 just 6.6% below its all time high of 1,565 reached in October of 2007.

The phrase “It’s different this time…” remains etched in my mind as this was a common theme among many investment managers with regard to many technology companies in the period leading to the bursting of the Dot Com Bubble in early 2000.  They contended that it made sense to invest in start-ups with high multiples and no balance sheet, “It’s different this time…”

As we now know it wasn’t different, the stocks of most of these companies fell hard and the NASDAQ has never come close to its peak.

I thought of this time period today as I was listening to Professor Jeremy Siegel on CNBC while working out.  He felt the market would rise 20% this year, he is generally bullish.

It is different this time 

While there have been a number of investment managers and analysts on CNBC and elsewhere indicating that they felt markets would rise in 2013, the mindless euphoria of the late 1990’s doesn’t seem to be present in general, and certainly not among my clients and the prospective clients I talk with.

In fact the mood seems a bit more pessimistic than I would expect given the solid rally in the markets that is close to entering its fourth year.  This pessimism is exemplified by the outflows we’ve seen over the past several years from equity mutual funds.  Much of this money has flowed into fixed income, despite historically low interest rates.

Filter out the noise and invest sensibly 

For regular readers of this blog, my investing suggestions for the current year will look very much like my suggestions for past years:

  • Start with a financial plan.  Your investment strategy should be tied to your goals and risk tolerance.
  • Focus on asset allocation.
  • Rebalance your portfolio as needed, generally twice per year is appropriate.
  • Don’t think you can consistently beat the market, you likely can’t.  This is why asset allocation and a healthy dose of low cost index funds generally make sense for most investors.
  • Use actively managed mutual funds sparingly, but don’t discount active management either.
  • Review your portfolio and your financial plan periodically, but don’t obsess over short-term market moves.
  • Manage all of your investment accounts as a total portfolio, not a collection of separate account.
  • Read up on the markets and the economy but don’t let yourself become driven by what you hear on CNBC or in the financial media.
  • Don’t get your advice from around the water cooler at work.  Your co-workers may be nice folks but they may not be financial experts and their situation may not resemble yours at all.
  • If you need professional advice, hire a competent fee-only advisor.

Here’s wishing you a successful 2013.

Please feel free to contact me with your financial planning and investing questions at any time. 

Check out our Resources page for links to some services and tools that might be beneficial to you.

Photo credit:  Flickr

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  1. Great thoughts Roger! I would tend to agree that it is a bit different this time as there is quite a bit of pessimism that’s out there. I don’t know if I am bullish or not, but think that we’re probably in for more of the same in terms of volatility, especially as the do nothing Congress just kicked the can down the road for a few more months. In the end, it’s important as ever to stay the course and not make rash and emotional decisions that can damage your portfolio. On a side note, sorry to see NIU not pull it out against Florida St, I was hoping they’d take care of them.

    • Roger Wohlner says:

      Thanks John. It really does feel much different than in the middle of past market rallies. As always my opinion is that investors should take a long-term financial planning based view of their investments.

      It is too bad about Northern, but none the less my son and his friends had a blast at the Orange Bowl.

  2. Great advice as usual! Following a solid plan that looks long term helps get around the ups and downs. I never stress about this year or next, because I am focused on 20 years. So if I stick to my allocations and focus on long term it is easier to ignore the media! Also I focus on getting my market information from sources like Bloomberg and Morningstar instead of the news shows which are more focused on ratings than good solid analysis!

    Happy New Year!

    • Roger Wohlner says:

      Thanks Andrea Happy New Year to you and to your family. As always your comment is spot on, I also love Morningstar, Bloomberg, and similar sources.

  3. I have noticed the same thing Roger, money has been stampeding out of mutual funds and into bonds even with the low interest rates. I cannot understand this rationale but none the less it is the trend taking place. I feel that investors still have 2008-2009 fresh in their minds and a majority of them were burned badly. With the mainstream media constantly talking about the fiscal cliff and other similar issues it seems like investors are still hesistant to return to the market.

    The upside to all this is I get to buy great businesses at cheap prices, although I seem to be finding less of them these days. 😉

    • Roger Wohlner says:

      Marvin, thanks for the comment. Far too many investors make decisions out of fear and for other wrong reasons. As you say far too much listening to the media and other fear mongers. In the meantime many investors have missed much of one of the greatest rallies in market history.

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