With that in mind, you've likely already seen a huge number of predictions for the coming year and beyond. Yet whether those attempts to foretell the future come from people who've proven reliable in their past predictions or from less reputable sources, there's only so much weight you can give any look ahead.
Nine predictions from nine experts
It's for this reason that Foolish retirement specialist Robert Brokamp searched far and wide for a variety of expert opinions on where the economy and the financial markets are headed in the future. As you can read in the January edition of his Rule Your Retirement newsletter, Brokamp talked with nine different experts, including folks like ETF guru Richard Ferri and stock skeptic Rob Arnott, to get their views on whether the U.S. is destined to see an even longer period of stock market stagnation, as Japan has seen since its market peak in 1990.
There's no denying that their views are interesting -- and as you might expect, they span the spectrum from extreme pessimism to some surprisingly bullish arguments. Yet amid the various ponderings about what the next shoe to fall may be, I found the comments from investment manager Larry Swedroe to be the most useful. That's because rather than taking his own stab at exactly what the future would bring, Swedroe gave advice that was simple and useful no matter what happens next year.
You should do what you can do
In a nutshell, Swedroe reminded Rule Your Retirement readers to focus on the things they can control. Sure, you can make a lot of money if you make the right predictions about whether U.S. banks like Citigroup
On the other hand, there are a lot of things you can act on with your investments. Here are five of them:
- Make sure you're taking the right amount of risk with your investments. That means ensuring that you're not overextended and therefore vulnerable to downturns, as well as making sure you have enough risk exposure to earn the returns you'll need to meet your financial goals.
- Diversify your portfolio so that you won't suffer huge losses when any one particular investment drops in value.
- Don't pay too much for investments. There are always lower-cost alternatives, whether you're looking at index mutual funds over load funds or discount brokers rather than full-service premium brokerages.
- Minimize the taxes you pay on your investments, both by trading less frequently and by using retirement accounts and other tax-favored investments.
- Cut your household costs. That reduces how much wealth you need to accumulate, and thus your investments don't have to grow as much.
Each of these points gives you something to look at in your own portfolio. However, I think the one that most investors can improve the most is in the area of diversification.
Diversifying is a lot harder than you might think. In picking individual stocks, the temptation is always there to look at whatever happens to be popular at the time. Right now, for instance, turnaround stories like Ford Motor
Now don't get me wrong: There's value in drilling down on a few companies to become a specialist in the way they work. But by doing so to the exclusion of all else, you risk missing out on opportunities in other sectors. Back in 2008, for example, energy investors were quite happy to stick with stocks from giants like Chevron
Don't fixate on the future
With all that's going on right now, it's fun to guess what will happen next in the financial world. But don't hinge your investing success on guesswork. By following advice like Swedroe's, you can take control of your financial life no matter what the future may bring.