As we enter the last month of the last year of the first decade of the first century of the new millennium (got all that?), I’ll spare you a recap of the entire decade and simply reflect on what has been an eventful year for investors to say the least. While a lot of this has been covered in the media and even in this blog, I think it’s a good time to take one more walk through 2009 and how it might relate to the future.
We entered the year feeling battered and bruised by what was one of the most horrific quarters of a generation to end 2008. A little blip in December provided a glimmer of hope that the worst was behind us. That blip was met by what can only be described as roughly 10 weeks of pain and some of the worst months on record in January and February. In early March, there was a true feeling of desperation in the air when it came to investing and the world economy in general.
Since then, we have enjoyed what has been a fairly historic recovery, despite a lot of mixed messages in the media and the day to day lives of our friends and family. International markets and real estate, which led the way down, have performed exceptionally well as would be expected in leading the world back out of the recession. The US market has followed steadily behind, but still providing impressive returns. While unemployment and other economic indicators continue to depress, they certainly seem to have leveled off. As they are lagging indicators, it only makes sense that they would struggle to keep up with a historically forward looking market.
So what does all this mean? In terms of changing how you invest or what you invest in, not much in my opinion. Remember all of the so called experts back in early March telling everyone to get back in as the tides were about to rise again? I don’t either. Remember those who yelled from the mountaintops in late February that it was time to pull out of the market? Have they gotten back in yet? Have they already missed the bulk of the recovery? It simply proves that we are rarely able to predict what is coming around the bend and that anyone who claims they can is just another salesperson selling expertise they simply do not have.
The smart money will continue to thoughtfully plan their financial future over the long term, allocate investment choices accordingly and then stick to that plan to the best of their ability. Despite short term success and failure, this is the only method that time and time again has proven the most effective way to enjoy a successful investment experience. Chasing returns at the cost of meeting your goals continues to be a losing battle.
A columnist in the Cincinnati Business Courier recently used a quote from John F. Kennedy that seems appropriate for the times in which we live. Kennedy said, “Change is the law of life, and those who look only to the past or present are certain to miss the future.”
Nothing is certain about the current recovery or what lies ahead in 2010 and beyond. The climb back to prosperity may be slow, job growth may move at a snails’ pace, and challenges at home and abroad will continue to play their role as wild cards to any planned path. But how different are these challenges to those that the world has faced in one form or another for generations?
It has never been more challenging to pick who the winners and losers might be going forward. Knowing that you don’t have to in order to invest successfully is an empowering feeling. All you need is a belief in the continued growth of the overall world market in the long term. So long as entrepreneurs and businesses continue to use their ingenuity and scarce resources to produce value for an ever increasing amount of consumers; and so long as you have the ability as an investor to provide those entrepreneurs capital in trade for a fair return on your investment, you can still proceed into 2010 encouraged that the 21st century, while off to a slow start, will be another step forward for the world.