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Best Financial Advice?-Follow Your Plan

Published by: Jeff Hall, CFP® Date: June 12, 2014

I enjoy looking back with a chuckle at the flood of the “What to expect in 20**” analysis that come out at the start of every New Year. 2013 opened with a deluge of negative predictions that seemed certain to affect our economy and capital markets. Remember the impending plunge over the fiscal cliff that was narrowly averted? How about the Chinese and U.S. stock market crashes that never happened? The bond market didn’t implode, the euro didn’t collapse, and the re-election of President Obama didn’t derail the U.S. stock market. One year, lower unemployment, and double-digit stock gains later, 2014 has begun with a lot less drama and a little more optimism.

In the spirit of the season of new beginnings and prognosticating, I thought I would share a few of my predictions for 2014.

– Many will go to their professional advisors looking for “simple” and walk away wondering why they’re still getting “complicated.”
– Most will still believe that their financial advisor has a legal obligation to put their interests first when more than likely, he or she doesn’t.
– There are more than 3,000 “active” portfolio managers in the US, and who knows how many economists. Some of them made accurate predictions last year, and of the few who did, an even smaller percentage of those folks will get it right again this year. Those who do will be elevated to rock star status likely to return to ambivalence again in the near future.
– Because we let our emotions drive our financial decisions, greed (or, more likely, fear) will cause some to make bad decisions with financial products that seem too good to be true.
– Some of us will make trivial purchases, sacrificing our tomorrow for today.
– The S&P 500 will not gain 10.1% this year. Although the annual average gain for U.S. stocks has actually been 10.1% since 1926, in 88 years not once have US stocks returned exactly 10.1%. As a matter of fact, they’ve never even returned between 8% and 10% in one year during that time. It’s usually a lot more or a lot less. Ironically, the consensus Wall Street expectation for US stock returns this year is between 8% and 10%. Apparently, making predictions close to long-term averages doesn’t create a lot of career risk.
– People will measure their performance against a popular market index instead of whether they’re on pace to achieve their personal financial goals. It’s a lot more exciting to try to beat an index than to monitor progress.
– The national pundits will find every opportunity to create plenty of chaos in an attempt to focus our attention on the less meaningful things. Sound financial counsel such as budgeting, saving and diversifying just doesn’t sell a lot of advertising.

What’s my best advice for this New Year? Have a plan. Follow it. Save More. Spend Less. Smile. Enjoy your family. If you follow that I predict that 2014 will be a great year!

Jeff Hall, CFP® is a partner and Senior Financial Advisor with Rather & Kittrell. Jeff is available at jhall@rkcapital.com