How to Think About 2014

After a great 2013, the major indexes start the new year off in the red.

Jan 26, 2014 at 7:00PM

Last year was nothing short of astonishing for the major indexes. The Dow Jones Industrial Average (DJINDICES:^DJI) closed up 26.5%, while the S&P 500 (SNPINDEX:^GSPC) ended the year 29.6% higher and the Nasdaq saw a 38.32% gain. Because of the extreme nature of these moves, many investors were calling for continued strength in 2014. That may or may not happen, but I think it's important for investors to readjust their expectations of what the markets may do this year.

Why? Well, toward the end of December, market pundits were calling for the major indexes to grow by double digits again in 2014. Most were predicting around a 10% gain for the Dow and S&P 500 on the basis that the housing market was continuing to improve, unemployment was falling, and economic indicators for the U.S. were for the most part looking good.

The problem, as we've seen in the past few weeks, is that it's not just about what happens here at home. In our interconnected world, what happens in Europe affects the United States, a slowdown in China will hurt multinationals, and weak growth in emerging markets means businesses have to find new markets to expand to. While on the surface the U.S. looks to be getting stronger each month, the world at large appears to be stalling out. Last Thursday, for example, China's manufacturing numbers indicated that the country's growth is slowing, and that news came on the heels of Monday's report showing 7.7% GDP growth in 2013. Although that number beat the government's 7.5% target, it still equaled China's worst showing since 1999.

So what's going on?
At the end of 2013, most investors were more focused on how they did during the year and wide-eyed about the future. They weren't looking at China or at emerging markets and thinking a slowdown there could hurt them here, regardless of their exposure to those markets. Granted, it would have been difficult to predict that a few weak economic data points from around the world would have hurt the Dow as much as they did this past week, and it was perhaps even more difficult to predict that after the first four weeks of 2014, after such a great 2013, the Dow would be down 4.21% year to date.

Now, with that thought fresh in your mind, take a moment to think about what could happen in the next four weeks -- or the next three months, or nine months, or the entire year. A million different situations and scenarios can pop up.

So why worry about it?

The only thing we as investors should expect is that over time -- and I'm talking about extended periods of time, not just weeks, or months, or even a single year -- the markets will go higher. Readjust your expectations so that if the major indexes fall 10% this year, or if you just break even, you're OK with that. Last year was not a normal year, and investors shouldn't be disappointed if 2014 isn't similar -- because it most likely won't be.

So for the remainder of 2014, just know that you've bought good companies, that you're going to hold them regardless of market fluctuations, and, most importantly, that their values will rise higher than they are today regardless of what happens in the meantime. All it takes is some patience.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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