If you review the 2009 to 2014 timeframe, the financial experts suggest a simple investment strategy. Find the stocks that performed horribly, lagging far behind the market leaders.
“You want to buy stocks of the companies where that extra income is going to be spent. That could make technology, for one, a big beneficiary, as well as healthcare and entertainment.”
An excerpt from Book Five in “The Knowledge Path Series” dedicated to helping you find the place of your dreams in the Sierra Mountain resorts.
Part Three in a 3-Part Series.
Part One: Tomorrow
Part Two: What Lies Ahead?
Please remember. Check in with your financial planner as the following trends and opinions change and may have before you read this.
Is there a rule of thumb you can count on going forward?
You know like “buy low, sell high.”
As they say in my family, it’s all relative.
If stocks earn 4% a year, but cash in the bank earns just 1%, stocks still win by a long shot.
- So Baby Boomers will have to stay in the stock market for a portion of their portfolio.
- For Millennials who invest on a regular basis in an IRA or 401(k) plan, and who won’t need to tap into their funds for two decades or longer, just buy and hold.
- Unlike the Baby Boomers who fear a significant loss over the next five years, don’t fret about bad financial news.
In fact, root for falling stocks, because you’ll be getting more shares for your money.
If you review the 2009 to 2014 timeframe, the financial experts suggest a simple investment strategy.
Find the stocks that performed horribly, lagging far behind the market leaders.
While the market leaders run out of steam, the laggards will probably …
beat U.S. returns over the next five years by buying low to eventually sell high. But psychologically, it’s hard to buy losers.
Losers like:
- Foreign stocks and bonds.
- Emerging-market stock funds .
They’ve lost 5.8% a year.
“We’re expecting to raise our positions there in the back half of 2016.”
Understand the risks, though.
In a world where a stronger dollar and weaker currencies depress the returns for American investors in foreign markets it may be time to nibble here and there.
“It will never be obvious when the markets, or their currencies, have hit bottom. next five years.”
- In a reversal, financial advisors and economists expect China’s share of global growth to fall to 21%.
- But, they expect emerging economies’ share to climb to 34%.
- And, previously out of favor European and Japanese stocks will continue to benefit from their central bank policies aimed at keeping interest rates at rock bottom to support growth.
But there’s no getting around the fact that …
“the world will face a financial crisis rooted in mammoth debt levels.”
- In 2016 a pivot in pay increases will be welcome news in the U.S. households.
- But, maybe not for stockholders as promotions and bonuses usually come at the expense of corporate profit margins.
And, the grass is greener.
The percentage of talented employees voluntarily quitting their jobs for better opportunities is the highest since early in the Great Recession.
Typically though …
“It takes a long time for people to realize they’re in a better bargaining position.”
That can change quickly thanks to the Internet and social media.
Once trading places begins, Millennials and savvy Gen Xs can take advantage of a powerful means to discover which companies are good ones to work for and which to avoid.
It won’t take long for workers who feel under appreciated to make the jump.
And, that’s great, right?
“In a perfect world, rising wages would spark a ‘virtuous circle’ where workers would boost spending, driving up demand for goods and services. That would lift business sales and earnings, in turn allowing companies to continue raising wages.”
A virtuous circle takes time to develop in a less than perfect world like the one you and I live in.
But, here’s another simple rule of thumb.
- Where the real economy may influence the stock market.
- Where consumer spending by Millennials and Baby Boomers may figure into gains in your portfolio.
As one expert put it.
“You want to buy stocks of the companies where that extra income is going to be spent. That could make technology, for one, a big beneficiary, as well as healthcare and entertainment.”
Steps:
(6) Anticipate changing circumstances and economic cycles.
(7) Persist and pivot to navigate external threats and opportunities.
(17) Sketch out your trajectory in 5-year time frames. Will we fall into another recession? Absolutely. Will you be ready this time with future-proofed strategies?
(19) Anticipate the growing shifts in life and business. Nobody wants to swim upstream if the current is moving everything in the opposite direction. Clue your fans in.
But, for those who successfully found good employment with a fresh start on a career path, even if their pay rises they’re reluctant to spend — or take a chance on a new job — so, don’t count on a broad positive impact on the economy just yet.
While the demographic trends probably aren’t as negative for growth, you should account for them and prepare to adjust in any long-term scenarios you construct.
The period after the 2008 financial crash turned out to be pretty decent for the U.S. economy.
And, that’s through the end of the decade
But with the Federal Reserve’s decision in December to begin raising short-term interest rates from near zero, it becomes more difficult to imagine longer-term rates declining significantly, barring a new recession or global shock. 
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