Investment Wisdom for 2015

Here we are at the beginning of a New Year, 2015, reflecting on our investment results from 2014 and peering into the future to see how to change our portfolio holdings to hopefully have a year of outstanding returns.

I have walked this path for decades, feeling like I have another clean slate upon which to write my investment selections for the coming year.
At a precipitous turning point such as this, I offer you, the investor, wisdom gleaned from nearly five decades of investment experience.

Regardless of the offerings of CNBC and other purveyors of financial information, no one (including Warren Buffett, Bill Gates, Art Cashin, John Bogle or Jeremy Segal) can predict the future with certainty. Furthermore, having a great historical track record of prognostication in no way increases the likelihood that this year's guesses will end up being right or at all useful.

As the statisticians will tell you, every guess regarding the investment market is an independent event, not related in any useful way to any prior predictions. All of this is codified into the rules of the investment industry by the Securities and Exchange Commission which requires the disclaimer on financial disclosure documents that "past performance does not guarantee future results".

But who reads financial disclosure documents? The lawyers who create them and the proofreaders who are paid to read them, that's who; not the investors who are putting their money on the line.

Many investors are looking for a "set and forget" investment portfolio strategy. That is to say, many investors want to make adjustments to their holdings once a year and then go about their lives, hoping that everything with their portfolio will turn out just fine. For those in Central Pennsylvania I call this the 'beach portfolio strategy'. Make your changes and head for the beach for the winter, paying attention to everything but your investment portfolio.

So here is what I want you to realize about investing in the New Year: no one can tell you what will work for the year 2015. Stop looking for seers, gurus and saviors. Second, since we cannot predict the future, then you, or someone you hire, must pay constant attention to your holdings and be willing and able to make appropriate changes as the year unfolds. To this end, you or your investment advisor must have a financial strategy to employ that guides your portfolio successfully. When and why you buy and sell investments (your portfolio strategy) should be designed now and employed as the year progresses.

Lest you believe that your mutual fund or annuity company is doing this for you, be very cautious. These portfolio managers are managing their mutual funds or annuity portfolios, not your personal account. You must track your investment performance and make changes even to these so-called "managed" portfolio products. Insurance companies and mutual funds occasionally fail their investors with unpleasant results.

Finally, if you cannot track your investments every day the market is open, you have seriously handicapped your ability to manage your holdings. Make no investments where you cannot both price and sell them on any day the market is open. Investing is all about making mistakes, and then correcting them before they become costly. Buy only investments you can correct when (not if) you make an investment mistake.

There are other investment principles that are useful to employ in managing your portfolio. For now, start with these notions, as they will keep you from making some of the more common investment mistakes. I wish you all a happy, healthy and prosperous New Year!

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