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2018 has been a challenging year for stock and bond investors around the world. Virtually every asset class, in every country is down year-to-date. Perhaps things will change in the last two weeks of the year, but at time of writing it has been a pretty miserable year.
Following is a sampling of stock market declines (not including dividends) around the world year-to-date: China is down 22%, Germany 16%, Emerging Markets 15%, Hong Kong 13%, The UK 11%, Canada 10%, France 9%, Japan 6% and the US is best with a decline of just 3%. Losses are even more pronounced if compared to market peaks which generally occurred in late January.
Bonds, which are considered safer, also declined in value around the world as interest rates increased. I consider bonds riskier than a well selected stock portfolio because they get ravaged by taxes and inflation. While they are less volatile than stocks, long-term they are riskier. Thus, I don’t spend any time studying the bond market, but have read about their general decline in 2018. While I consider cash as a waste of money, this past year it proved to be the best investment, although this wasn’t predictable at the start of the year. Interestingly, expert consensus predictions at the beginning of the year were for the US market to go up 7-10% and the Canadian market to be up 4-5%. This lends credence to my first prediction every year, that most predictions will be wrong.
If this has you depressed, you’re not alone. The majority of investors are now more bearish than at any time since February of 2016, when the S&P 500 also had plunged 11% in a two-month period. To me, this is a very optimistic sign. For more on how market sentiment impacts future returns, please read a chapter in my book titled, “’Everybody’ Is Often Wrong.” This chapter is very pertinent to commodities, as well as stocks.
As previously written, short term market direction is very unpredictable, but long-term the market returns about 10% a year. The difficult year creates a great back-drop for setting clear investment goals for 2019. I am a big believer in the SMART goal process, with my own twist. S=Simple, the goal should be very simply stated. M=Measurable, the goal should be specific so progress can be measured. A=Agreed upon, with others impacted by the goals. R=Reasonable, so they are attainable with reasonable additional effort, although having a “stretch” component can also be productive. T=Time-based, so there is a sense of urgency to achieving the goal.
The number of goals should be limited to provide focused direction, and would suggest that even ONE goal is acceptable, whereas THREE goals should be the maximum. If we set too many goals, the likelihood of achieving any is lessened. Everyone’s situation is unique, so it is important to individualize, but here are a few examples of pertinent goals regarding TFSA investing:
- Read the book “STOCKS for FUN and PROFIT ~ Adventures of an Amateur Investor,” by March 31st, 2019.
- Take better control of my own destiny by amalgamating all my TFSA accounts into one at an internet brokerage site, by Feb 28th, 2019. (Many Canadians have multiple accounts, making management more difficult)
- Maximize my 2019 TFSA contribution by adding $500 into the account on the 15th day of each month. (The 2019 contribution room is $6,000)
- Begin investing in stocks by following the, “Titanium Strength TFSA Portfolio.” Make six stock decisions during the year, by purchasing one company on the 15th day of every second month, beginning in February.
- Make up for my past lapses by adding $1,000 on the 15th day of each month until such a time as my total contribution room is used. (The cumulative total maximum will be $63,500)
These are simply examples of potential goals. Of greatest importance is setting goals you want to accomplish.
If you have enjoyed my articles in 2018, please give me a wonderful Christmas present, the gift of a book review on Amazon.ca, or Chapters. Thanks for reading my material this past year. I hope it has helped your financial success. Wishing you all a terrific Holiday Season, and all the best in 2019.