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Stay Away From This Asset Class in 2015

The SwamiAdmittedly, this is a pretty deceiving headline. We see headlines like these every day in the newspapers, TV and from colleagues at work. The truth of the matter is that there are certainly going to be assets classes that will behave horribly while other asset classes do extremely well. The point is, neither you nor I (or anyone else) will accurately be able to predict which ones will do better than others.

For every person that says stocks will have a meteoric rise in 2015 there will be just as many that will say to avoid them. You’ll have others saying that bonds are doomed while others will sing their praises. Buy gold, sell gold; buy real estate, sell real estate. The point is no one knows which asset classes will do well and which ones will fall.

Of course, hindsight is 20/20, but foresight is 20/200. Some will guess right and exploit that guess interpreting it as superior knowledge or knowing more than the market does. Often these folks will make several hundred guesses and only brag about the one or two they got right, ignoring the many they got wrong. Note: be leery of these “experts”.

Here’s one thing to keep in mind for 2015 and beyond: If all of your investments go up at the same time and down at the same time, you’re not properly diversified. That is, in a bull market if all you’re seeing is spectacular gains and little if any losses – be very concerned. Over time, investors should expect gains and losses in every asset class they own – stocks, bonds, real estate and commodities.

Another tempting line you may read is, “Invest like Warren Buffett.” Sorry to break it to you, but you’re not Warren Buffett, nor will you ever invest like he does. After all, neither you nor I have the extra billions of dollars to buy entire companies. If you do, why are you reading this blog? But you can think like the Oracle of Omaha. That is, make smart investment decisions and don’t let your emotions do the investing for you. Even Mr. Buffett has advisors that counsel him on companies he’s interested in buying.

Here’s the really cool part – perhaps you can invest like Warren Buffett – at least on a smaller scale. Why? Essentially, Berkshire Hathaway is an index. Check out all the companies under the BRK umbrella. From insurance to underwear there’s plenty of diversification. Just like an index fund.

And that’s what you should think about as well when you invest. Work with trusted advisors, and invest wisely in different asset classes with excellent diversification among those asset classes. Forget about trying to pick which asset classes will be up or down. Neither you nor the “experts” can outsmart the market. If you can’t beat it, join it.

One Comment

  1. J says:

    Solid rational advice.

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