A popular question this time of year is: What will the market do? I don’t know. I can guess, of course, but it’s just a guess. But, more importantly, what market are you referencing? Stocks? Bonds? Gold? Bitcoin? YCharts identifies twenty-one major indices and tracks several thousand more from ninety different providers. Morningstar follows more than 85,000 global markets.
Last year, market returns varied significantly. The NASDAQ was up 45%, while the energy index fell 33% – a spread of 78%! Small-cap stocks rose 11.9%, real estate dropped 10.9%. Long-term bonds rose 12.4%, junk bonds fell 1%. And the ever-popular 60/40 index rose 6% after being declared dead and obsolete last year.
Some investors are concerned about the valuations of the market. I assume they’re worried about our US market, but I’m not entirely sure. The United States has three primary indices – NASDAQ, S&P 500, and Dow Jones. It’s possible to have exposure to a dozen different indices in a diversified portfolio where the US allocation accounts for about 25%. Does it make sense to liquidate an entire portfolio because of one overvalued market? It does not.
Rather than worry about the market, concentrate on your personal goals, save your money, think long-term, and buy the dip.
January 5, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
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