If you’d invested your funds in 2012 based on doom and gloom newspaper headlines, you would have missed out on a great opportunity. Think about the lessons of the past before jumping ship on your current wealth management plans.
If you’d invested your funds in 2012 based on doom and gloom newspaper headlines, you would have missed out on a great opportunity. Think about the lessons of the past before jumping ship on your current wealth management plans.
A few weeks back a physician called me to tell me his sob story. He’d been so scared to invest his money after the market fluctuations the past few years that he became paralyzed and did nothing in 2012. He kept reading and hearing doom and gloom headlines in 2012, and that prevented him from sticking to a long term investment plan.
It was understandable given the state of our world economy, our country’s debt problems, the impact of Obamacare on physicians, among other events.
So I decided to show him some of the headlines and predictions from well known newspapers in 2012 and see how his portfolio would have performed had he just continued to plug away.
2012 Quarter 1
“Investors go into 2012 hunkered down, frustrated, and skeptical…If there is a common theme among analysts’ forecasts for stocks…it is to brace for more of the wild swings that were the hallmark of 2011.”
-Wall Street Journal, January 3, 2012
“The world economy will experience a brutal slowdown…Every European country will be in recession in 2012, and probably in 2013…Equity markets around the world will top out during this quarter and then enter the next down leg…”
-Barron’s, January 16, 2012
“Unemployment in the euro zone jumped to a 15-year high Thursday, while inflation unexpectedly accelerated.”
-Wall Street Journal, March 2, 2012
2012 Quarter 2
“Suddenly it has become easy to see how the euro…could come apart at the seams. ..Things could fall apart with stunning speed in a matter of months, not years.”
-New York Times, May 18, 2012
“Feeble hiring by US employers in May roiled markets and dimmed the already cloudy outlook for an economy that appears to be following Europe and Asia into a slowdown.”
-Wall Street Journal, June 2, 2012
“With leading investors shunning shares, a six-decade passion for equities has come to an end”
-Financial Times, June 24, 2012
“The downward revision in [earnings]guidance could portend a long slog for stocks and the overall economy…”
-Wall Street Journal, June 30, 2012
2012 Quarter 3
“The US economy slowed sharply in the second quarter, growing just 1.5% as consumers slashed spending and businesses grew more cautious about hiring and investing, underscoring that an already wobbly recovery is losing even more steam.”
-Wall Street Journal, July 28, 2012
“The global slowdown in demand is hitting the manufacturing sector in the world’s largest economies, with activity sinking to its lowest level since June 2009, when most industrialized countries were mired in recession.”
-Financial Times, August 2, 2012
“Activity in China’s manufacturing sector—the engine for much of Asia’s economy—shrank at the fastest pace since the depth of the global financial crisis.”
-Wall Street Journal, September 4, 2012
2012 Quarter 4
“The slowdown in the global economy and anemic US recovery are expected to result in one of the worst US quarterly earnings seasons since late 2009.”
-Financial Times, October 8, 2012
“Wall Street’s post-election stupor is turning into a real headache for some stocks, as many well-known and even ballyhooed names fall into bear market territory.”
-USA Today, November 9, 2012
“Fears that Washington will prove unable to avoid looming tax increases and spending cuts have eclipsed concerns about Europe’s debt crisis, top business executives said Tuesday, and they worry that political gridlock might tip the economy into recession next year.”
-Wall Street Journal, November 14, 2012
The Year It Didn’t Happen
If you had read and acted on those headlines last year, you would have been kicking yourself for missing out on excellent investment returns.
Here’s what really happened:
The plunge off the so called “fiscal cliff” was averted. Europe did not fall apart. China’s economy and stock market did not crash. The re-election of Obama did not derail the US market.
Doomsday didn’t arrive on December 21.
Let’s assume you started with a $1 million investment portfolio on 1/1/2012. A well diversified portfolio of US and international stocks gave you the following experience last year (figure 1).
Not too shabby if you ask me.
If you listened to the dismal headlines I presented and acted on them, it would have cost you “only” about $200,000.
How many nights, weekends, and holidays would you have to work to make up for that?
This year there have been and will continue to be other headlines. And the headlines will sound so convincing that you’ll constantly be tempted to act on them.
But before you do, stop and remember the headlines of last year and how they were completely disconnected from the investment returns you should have gotten.
Setu Mazumdar, MD, CFP® practices EM and he is the president of Lotus Wealth Solutions in Atlanta, GA www.lotuswealthsolutions.com
1 Comment
It comes down to this. Despite our problems, the US is the best place in the world to do business. Our problems are short term. Yes we have debt problems, but they will be fixed. We always do the right thing after we try all the wrong things first. This was a state,net from Winston Churchill in regards to the US. Still, China has its own real problems. It will not be the biggest player in 10 years. Europe, is in decline. Their population will shrink by a 3rd in the next 25 years. We have unlimited natural gas , and we will be a net exporter of energy in 10 years. Our manufacturing is increasing because using NG for energy is making it cheaper to build here, rather than China and then shipping back to us. Plus, the Chimese steal technology. It is also more expensive to do business in China as workers assert their rights. Things do look bright in the future . When my financial adviser a year ago if I had reservations about investing, I said no way. We are the best country in the world. To not invest here, would be nuts.