These were the 10 best-performing Dow-Jones stocks in 2016.
I owned every one.
Of course, I also owned every one of the 10 worst-performing stocks. In fact, I owned just about every stock in all the major US stock markets. That’s because I don’t own individual company stocks. I own index funds.
Index investors benefit from low costs and high levels of diversification. Unfortunately, being an index investor does not shield you from high levels of anxiety.
Even as beneficiaries of a stock market rally that can only be described as “yugggge,” uncertainty over the next four years has left many of us unsettled.
I can’t predict what will happen in 2017, which is why I am relying on what worked in the past: staying invested, staying diversified, and staying calm.
To be specific:
1. Learn to love your cash. Even if savings accounts have not offered much return in recent years — and this may change — having cash on hand is good for your nerves and your financial health. You don’t want to be forced to sell investments when the time and the price are not optimal.
2. Don’t try to time the market. As appealing as it may seem to jump out of the market completely, most of us need market returns to reach our goals. Plus, you’re unlikely to know when to jump back in, and that can cost you. When markets move up, they move up fast. The Dow was up more than 13% in 2016, according to “The Wall Street Journal,” but nearly 8% of that increase came since election day.
3. Stay diversified. Look at the list above. The Trump election has already benefited companies in the financial and the energy sectors. Which companies will do best in 2017? No one knows. That’s why you want to own them all.
[Still believe there’s a person, a company, a computer algorithm that can consistently pick the best stocks? Consider “It’s Time to Ignore Advice About Which Stocks to Buy in 2017,” a recent article in “The New York Times.”]
If you do feel a need to take action, I have a recommendation — get a long-term financial plan, or revise the plan you already have. Once you know what level of return you need to reach your goals, you can make reasonable decisions on whether to change your investments…or your goals.
I recommend you choose an hourly planner — someone who doesn’t sell any financial products, and can be 100% objective about you, your goals and your investments.
The markets will continue to move up and down in 2017 and beyond, but with the right plan, and the right planner, you’ll feel confident that you’re moving ahead.
I look forward to hearing from you.
P.S. Yes, I am living in Bellingham, Washington. No, I am not retired.
It may not be for everyone, but I am successfully working virtually with clients in far-off places, like California. We use online meetings, email, even ancient technologies, like the telephone and US Mail.
Do get in touch. If we can’t work together on a virtual basis, I am happy to recommend planners who are closer to home.