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What You Must Do in 2013 (Even if You Don't Want To)

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The financial crisis four years ago wiped out trillions of dollars in wealth. Yet even though the stock market has recovered nearly all of its losses from its pre-crisis highs, the real damage has been done in the time since stocks started recovering from their 2009 lows.

As bad as the economic losses from the market meltdown were, the more lasting impact has come from the loss of confidence among investors in stocks. With some investors staying out of the stock market entirely and many more reducing their asset allocations to stocks, investors on the whole haven't taken full advantage of the massive recovery in the market over the past four years.

You can't afford to make that mistake. No matter how scary the market may seem, coming up with a plan to get into riskier assets like stocks in 2013 is essential if you want to reach your financial goals.

Locking in permanent losses
In the aggregate, the price tag of that loss of confidence is staggering. According to figures from Bloomberg, U.S. investors have left a whopping $200 billion on the table by retreating from stocks at exactly the worst moment. With the S&P 500 having gained 94% since its March 2009 lows, assets in funds that invest in equities have only seen an 85% gain. Moreover, despite the fact that stocks have risen so far in so short a time, overall allocations of retirement-oriented funds to stock investments actually declined by half a percentage point -- suggesting that investors were far more active than usual in rebalancing to lock in gains on the way up in order to protect the money they'd recouped from their past losses.

Meanwhile, investors are gravitating toward fixed-income investments. Despite the fact that bond funds have produced massive returns in recent years, nearly all of that performance has come from capital appreciation as bond rates have continued to fall. With 10-year Treasury bonds having been locked below the 2% mark for most of 2012, income will play only a tiny role in overall bond returns. Moreover, if rates start to rise, then capital losses will become a definite possibility for the future, which has prompted some investors to make bets against bonds using the ProShares UltraShort 20+ Year Treasury ETF (NYSEMKT: TBT  ) .

Bucking the performance-chasing trend
Interestingly, the refusal of investors to get back into the stock market flies in the face of past behavior. Usually, after several years of market gains, investors would be clamoring to get into stocks as they rise toward new highs. But even recently, fears about the fiscal cliff, Europe, and other global macroeconomic concerns have kept investors on the sidelines. Bloomberg cited figures showing that the bull market is the first in 20 years in which investors have cut back on stocks, and the percentage of households owning mutual funds has declined as well.

Part of the issue may be that pockets of the market are still seeing huge levels of volatility. For instance, in 2011, financial stocks Bank of America (NYSE: BAC  ) , AIG (NYSE: AIG  ) , and Citigroup (NYSE: C  ) all plunged on worries that their attempts to sell off non-core assets and retrench their core businesses would fail, exposing investors to further dilutive capital-raising methods and leaving existing shareholders without any future growth prospects. Investors like Fairholme Fund's Bruce Berkowitz were ridiculed for buying financials and suffering huge losses for fund shareholders.

Yet in 2012, after many had abandoned the fund and financial stocks more broadly, B of A, AIG, and Citi all rallied. Those gains, combined with a bounce-back in shares of Sears Holdings (NASDAQ: SHLD  ) , helped vault Fairholme to the top of the performance charts this year. Those who sold at the lows again suffered those losses while missing out on the subsequent gains.

Don't wait any longer
Of course now, with stocks already having risen so much, you might be reluctant to get in at what could be the highs. Yet even if you don't commit all your spare cash to stocks right now, what you need to do is recognize the necessity of committing some of your current and future financial resources to risk assets of some sort. Whether you think stocks, real estate, or other productive assets are your best bet for financial success, get a strategy in place now that will help guide you toward putting more of your money where it can work harder for you.

2013 will be just as unpredictable as 2012 was. But to succeed in the long run, you must put together a strong investing strategy. Even if you don't want to, buying stocks will most likely be a key element of that strategy going forward.

AIG may well be the pinnacle of Bruce Berkowitz's career, but is it still a smart investment today? We'll help you sort fact from fiction to determine whether AIG is a buy at today's prices in our premium analyst report on the company. Just click here now for instant access.

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance. You can follow him on Twitter @DanCaplinger.


Read/Post Comments (36) | Recommend This Article (89)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 26, 2012, at 1:23 PM, StopPrintinMoney wrote:

    Oh this old crappy wall-street-nonsense. Keep buying and ignore the current market conditions - in the long run you're going to be a millionaire, so why bother?.. So don't worry and keep buying. Sheesh.....

  • Report this Comment On December 26, 2012, at 5:24 PM, canadacomments wrote:

    @StopPrinting - Do you buy 1% treasuries or just put your money under the mattress?

  • Report this Comment On December 26, 2012, at 5:24 PM, BankerMary wrote:

    The continued rising and new costs for your services is getting out of hand. Do you really expect customers to pay an annual fee for your newsletters then pay for a premium report on companies you recommend in the monthly newsletters to begin with. Why aren't the companies with the premium reports just covered in your monthly newsletters? I though that was what I was paying for when I signed up for the services. Maybe it is time to switch services completely.

  • Report this Comment On December 26, 2012, at 5:36 PM, Bonefish100 wrote:

    And yes, let's continue to ignore the lack of leadership and direction in DC. Thank you, I'll stick with cash for now..Will need it anyway to pay for the increasing income taxes.

  • Report this Comment On December 26, 2012, at 6:02 PM, rdkbrla wrote:

    I agree with Banker Mary; I've invested in too many losers to continue with your service. There have been winners, but the losers outweigh them 2 to 1 for a total loss of several thousand dollars. I can do better sticking with Blue Chip companies.

  • Report this Comment On December 26, 2012, at 6:13 PM, viabletx wrote:

    EBIX and GMCR have killed my portfolio - thanks MF!

  • Report this Comment On December 26, 2012, at 6:38 PM, HerrGlock wrote:

    Agree with some of the folks above my post....where do I go to get out of the MF BS

  • Report this Comment On December 26, 2012, at 6:50 PM, Peterbhard wrote:

    One prime issue that is keeping people out of the market is fear of the Obama administration`s

    patently hostile attitude to business and the capitalist system.

  • Report this Comment On December 26, 2012, at 7:44 PM, terryongarland wrote:

    I have been active in the market the whole way, forever, but I am even more cynical now for our future.I am in because there is no where else to go for yield, but a market propped by QE to infinity gives me no confidence. That's it in a nutshell...no confidence in our government or much else.Making money, but why don't I feel good....

  • Report this Comment On December 26, 2012, at 8:59 PM, TMFGalagan wrote:

    @BankerMary, @rdkbrla - Not knowing your situation, I can't comment on what the newsletters you've subscribed to are providing. But I know one thing: my Fool.com articles come at no cost at all.

    best,

    dan (TMF Galagan)

  • Report this Comment On December 26, 2012, at 9:05 PM, rftwpuma wrote:

    I handle a large sum for Mom and my own. And I am over 65. I have professionals doing most now at 1% and they have made 8% in a balanced account last year. I follow you and am a member, but it seems your getting into a position where your as commercial as any other firm. That scares me off. You do bring on many ideas and I appreciate you for this. Thanks Jim

  • Report this Comment On December 26, 2012, at 9:30 PM, GrumpyOldGuy wrote:

    Dan, I sense some hostility to your article from the above posts so I hesitate to jump on ....but....Why did you pick a four year period to talk about the huge runup in stocks. Last year at this time it was a three year period that had the huge runup in stocks and TMF had a few articles like yours that presented the same message that you present today but with the three year results being touted.

    FYI,

    Dec. 1999 SPY = $146.88

    Dec. 2007 SPY = $146.21

    Dec. 2012 SPY = $141.75

    Hardly a strong endorsement for jumping feet first into the deep end of the pool.

  • Report this Comment On December 26, 2012, at 9:52 PM, rbraseth wrote:

    I think the company who likes to claim to be so transparent needs to get honest with its Stock Adviser numbers. I am not interested in accumulative totals. Beating the S&P by 65% and 24% or whatever is completely misleading. I'd like to see an apples v apples comparison year over year. TMF owes that to its readers. This is not the same company it was at the start. Now we get upsold and offered more and more funds with better and better analysts. The problem is, it's not better. It's just bigger and and the company has strayed from its roots. Score cards and community are mere distractions.

  • Report this Comment On December 26, 2012, at 10:03 PM, wjcoffman wrote:

    Let my MF SA subscription expire. I'm pretty sure the $200 is better spent on an SP500 tracker.

  • Report this Comment On December 27, 2012, at 12:51 PM, cajunbabydoc wrote:

    I never comment on blogs but must admit that I too am tiring of all the highly priced item parade. Supernova this, Million dollar portfolio that, Pro this, option/stock advisory that. Maybe its time for me to bail out also. Just sayin'

  • Report this Comment On December 27, 2012, at 4:45 PM, jacksonhaus wrote:

    I have been a member since 2004. Today, you are spending more time and energy selling another name service with SUPER or PRO or MILLION than picking and advising winning stocks and strategies. I am looking for another advisory service which does not keep switching members service plans. Not happy with the current way you are "working" your customers.

  • Report this Comment On December 27, 2012, at 6:59 PM, maniladad wrote:

    Still on my first (2-year) subscription to SA so can't comment about long-term changes but I have the same reaction to all these additional charges for 'in-depth' analyses, I come to MF for the boards and the people on them. They are an incredible asset for specific and general perspective and one I'd be reluctant to lose. The learning curve here has been not so much about learning how to choose companies but about learning how to discriminate among the posters.

  • Report this Comment On December 27, 2012, at 8:37 PM, Drew1234 wrote:

    Interesting comments for sure. I have been a happy SA subscriber for about 5 years. Taking in to account the subs costs-I am much farther ahead than I would have been just doing a Vanguard Index fund-which is my benchmark.

    That said-I agree that the last 18 months seem to be heavy on the marketing and have given that feedback.

    Also-I put money in the MF funds when they started-I can't seem to find a board talking about their performance over the last few years. Am I looking in the wrong place?

  • Report this Comment On December 27, 2012, at 8:38 PM, 123spot wrote:

    Spam attack alert. I have checked the contributions to MF premium boards of BankerMary, rdkbria, and viabletx, above. You are reading the gist of their participation, and almost all of it, above. Hmmm...

    I didn't have the time or motivation to check the other obvious ones. Spot

  • Report this Comment On December 28, 2012, at 1:41 PM, pardoc wrote:

    Thanks Spot. There is always two sides to a story...for me the service had to match my age, income, and investment goals. Started with SpOps to enhance a managed account - that was the wrong service for me so I switched out to Supernova and now am trying MF Options to garner some gains in the midst of a sluggish recovery. Now with my tax burden growing at the state and federal level owning stocks long is better than paying capital gains every year from the managed account. Learning and managing is better than being a passive client - at least for me.

  • Report this Comment On December 28, 2012, at 2:08 PM, WineHouse wrote:

    Frankly, all these come-on emails that try to lure me into subscribing to the various Motley Fool for-pay materials just bug me. It's usually patently obvious what "secret stock" they're touting that you can "only learn about" by paying for a subscription to their newsletters. And it usually turns out to be a stock that has already been the subject of one or more on-line (free) articles by one or another commentator. The most recent was about this "mystery stock" that I could "only" learn about by subscribing to their newsletter, that could bring in many-fold reward if I bought NOW, before the price went UP the way Google's and Baidu's went UP for those who bought in early enough --- well, it was easy enough to determine that this mysterious European country with a population of 140 million is Russia and that the stock is Yandex (YNDX on the NASDAQ). And my feeling is that I'm not willing to bet good money on YNDX right now, nor on QIHU or BIDU for that matter, thank you very much, despite the Motley Fool hype, and I don't need to spend good money on a subscription to your newsletter to learn the name of the stock. And so it goes. Those who know how to do research constructively on the internet don't need the paid subscriptions, and those who don't will not necessarily benefit from those subscriptions. Stick with info that's free, and read everything with a large grain of salt.

    Cheers. Happy New Year.

  • Report this Comment On December 28, 2012, at 3:15 PM, dkruiser50 wrote:

    Good article Dan. What is with so many of the previous comments and the woe is me attitude? Ultimately the decisions make are our own and we live with them. So many like to blame someone else, all the way up to the oval office! Take what ideas (and their are plenty of good ones) you can from MF along with other sources and use them. Not all their ideas or yours or mine will succeed, but control them and make them your own. We have nobody to blame but ourselves for success or failure. Quit bitching and start thinking for yourself!

  • Report this Comment On December 28, 2012, at 6:31 PM, TheRealRacc wrote:

    Still can't figure out why people to come a website they seem to hate....

    Keep it goin MF.

  • Report this Comment On December 28, 2012, at 9:00 PM, ldtinvest wrote:

    I just subscribed to MF SA and I can add that I am highly disappointed. The up-sales pitches are endless. Why not just charge a fair amount - do the research - present the recommendations and let the subscrber decide if it right for her/him. Don't keep misleading just ot sell more advice.

  • Report this Comment On December 28, 2012, at 9:36 PM, TMFGalagan wrote:

    @GrumpyOldGuy - The four-year period was chosen because it was really only *after* the big market drop in 2008 that most investors soured on the stock market. Before then, investors seemed happy to keep buying even as stocks hit record highs and valuations were steep - far steeper than they are today even after the big rise.

    best,

    dan (TMF Galagan)

  • Report this Comment On December 29, 2012, at 7:50 AM, DCMTokyo wrote:

    Am in my first year of subscription to TMF. I find the approach advocated to investing on the mark - invest rather than trade.

    I also noted numerous board inputs from David plus TMF analysts providing very practical thoughts including a humbleness that reflects best intentions and not over-promising.

    Pushing too products and services? Of course, they are in this to make money. Like everyone else. We have a choice to delete the emails or buy. Buy recommendations or not. Subscribe or not.

    I bought DDD at around 35 so have more than made on my sub.

  • Report this Comment On December 29, 2012, at 10:50 AM, patches222 wrote:

    I AM CONVINCED, OBAMA IS IN "WAY OVER HIS HEAD!! ", A FRAUD, NO WONDER HE "HIDES" HIS GRADES FROM ANY UNIVERSITY HE EVER "SAID " HE ATTENDED!!

    ACTUALLY , OBAMA ,BELONGS IN PRISON FOR ALL THE "CRIMES" HE HAS COMMITTED AGAINST OUR CONSTITUTION, OUR CITZENS, AND OUR MILITARY!!

  • Report this Comment On December 29, 2012, at 11:31 AM, zone001 wrote:

    The "Hope & Change" Obama promised us in 2008 now translates to "Hope Obama Changes". The man, and his administration, has given our country 4 years of history to review his failures to support the financial community. The idea that his attitude, and administration, is going to change during the next 4 years is not likely. Faced with higher taxes, more government spending, devaluation of the dollar, inflation on all things we buy, continued high unemployment... how in the world can we expect sensible stock market investors to take such a risk and bid the market higher?

    The 47% Romney referred to, plus other uninformed folks, voted to give Obama another 4 years to continue his erosion of America.

  • Report this Comment On December 29, 2012, at 3:11 PM, Rowlando100 wrote:

    i am a M$ port subsciber from the beginning. I like the concept of TMF investing with us. The annual fee is at the absolute top of my limit for an advisory svc & is a continuing concern for me. Some of the extremely large losses also concern me although I'm extremely happy with the few outsized up-siders like COStco So I'm in for another year. Considering what appears to be an unusually shaky present and possible future environment for equities I would like to see more extremely careful research and less upselling!

  • Report this Comment On December 29, 2012, at 11:03 PM, jlclayton wrote:

    Dan,

    Thank you for your article and I wholeheartedly agree. I've been an MF subscriber for about 6-7 years now and have learned a great deal about investing for the long run and keeping my focus on well run companies that have good fundamentals.

    I don't expect MF to be able to see the future and guarantee that every recommendation is a rock solid winner. I expect detailed analysis, lively discussion, and articles that help me learn how to develop an investing strategy and have the confidence to stay with it.

    I have not been disappointed!

  • Report this Comment On December 31, 2012, at 4:58 PM, whyaduck1128 wrote:

    I recently renewed my SA subscription. While I enjoy MF, I find the constant barrage of "upgrade" e-mails very annoying. If the Fool would cut back on the frequency of these sales pitches, I'd be much less annoyed and probably more likely to take a serious look at them.

    Another thing I'd like to see is more commentary on stocks other than the usual AAPL and AMZN. Just how much back-and-forth on AAPL in particular (which I own and intend to hold) do we need? Either you like it or you don't. I'd like to hear more about the monthly recommended stocks, what those who already hold them think.

  • Report this Comment On January 01, 2013, at 4:36 AM, tomami wrote:

    If you want some good advice I recommend you purchase a few books instead of a investing service. My number one suggestion would be The Intelligent Investor by Benjamin Graham (latest edition), Security Analysis by Graham & Dodd, Beating the Street by Peter Lynch, and The Little Book That Beat the Market by Aswath Damodaran. Stop expecting people to tell you specifically what stocks to purchase because their success is no greater than you flipping a coin. You need to learn how to think critically and be alert and take control of your own investment future.

  • Report this Comment On January 02, 2013, at 9:45 PM, tangolady wrote:

    All of the articles and videos I receive are too long winded and therefore annoying. We don't have unlimited time to sit in front of the computer and do nothing else. We also have lives, jobs. families, etc. Why don't you just get to the point???

  • Report this Comment On January 02, 2013, at 11:51 PM, 123spot wrote:

    Hey, tango, checked you and Herr (who could have guessed). Can you say "freeloader" ? Spot

  • Report this Comment On January 02, 2013, at 11:57 PM, 123spot wrote:

    tomami , you are definitely cleared. You can thank me later. Spot

  • Report this Comment On January 04, 2013, at 9:44 AM, TimetogoMF wrote:

    I agree with all on the MF becoming just another newsletter that is full of hype and trying to get you to subscribe to yet another newsletter by attention grabbing, long winded articles pointing you to a free report...as long as you sign up for another newsletter. I let my trial run of Stock Advisor expired and ignored the Supernovae hype. Still have Rule Breakers as I just got Fooled again a couple months ago..but I'm tired of all the MF BS! If you want a good newsletter that will send you a few other offers but not inundate you try Capital and Crisis.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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