How Sure Are "Sure Things"?
As we began 2010, most investors I spoke with and most of the "talking heads" seemed convinced that there were a few sure things:
- The price of gold would rise.
- Bond yields would rise.
- The dollar would fall in value.
- Inflation would raise its ugly head.
Gold
We began the year with gold at $1,113. We ended the quarter with the price at virtually the same level.
Bond Yields
The 10-year Treasury note began the year yielding 3.85 percent. Here again, the yield was virtually unchanged.
Dollar The Euro was trading at around $1.44 at the start of the year and did change in value by about 6 percent. However, the change was in the other direction as it ended the quarter at around $1.35.
Inflation The CPI rose just 0.3 percent in January, and it was unchanged in February.
Real Estate And Vanguard's REIT Index Fund returned about 11 percent -- about equal to the annualized return for the Dow Jones US Select REIT Index since 1978, or a full year's return in just the first quarter.
So much for sure things.
And despite all the problems we have faced this year -- economic and political, domestic and international -- equity markets around the globe turned in solid performances. Unfortunately, investors continued the mistake of 2009 -- pouring most of their new investment dollars into bond funds. Only those who ignored gurus like Nouriel Roubini and had the discipline to stay the course and rebalance have benefited from the rally since March 2009 -- the greatest equity rally since 1933.
Despite the academic evidence demonstrating that you're best served by ignoring the forecasts of so-called experts, many investors continue to base investment decisions on them. As much as we would like to believe otherwise, there's only one person who knows where the market is going, and none of us get to speak to him (or her) -- or if we do, we don't get answers!
You're best served by understanding that there just aren't any clear crystal balls. The winning strategy is to have a well-developed plan and to stick to it. And one good way to help you accomplish that objective is to tune out the investment porn delivered by Wall Street and the financial media. And if you just can't resist watching CNBC, be sure to do it as I do: with the mute button on.