In our quarterly reports to clients, we always include commentary on the markets, economy and other financially relevant information. Our 2014 Q4 reports recently went out, and we wanted to share our commentary with you as well. We would also love to hear your questions and comments in the comments section below.

New Year’s Resolution – “Do More of What Makes You Happy”

We think that would be a good resolution.  However, focusing on the financial markets around the world will rarely help!  The Media elicits emotions that cause lots of dissatisfaction and fear.

In 2014, for example, few categories did as well as big blue chip American companies.  The S&P 500 index did great, so now the news is full of advice about how you “should” have invested!  Of course with us, you DID invest in the S&P 500 – and your diversified portfolio also invested in bonds and other assets worldwide.  Remember 1987, 2000, and 2008 when the S&P 500 was, as the pundits later agreed, the one place to avoid investing in – EVER AGAIN! (Source)

Our society seems to love being unhappy about markets!  “Are they going to correct?”  Yes – we just don’t know which ones, when, and how badly.  “Did we miss out on the ‘best performance of the year/decade/century?”  “Which asset class was the one we should have exclusively chosen?”

If you had thought that the S&P 500 was the best place to be in 2014, think again.  The top performing market of 2014 was China (up 44%)!  Who would have guessed?!

We saw a fascinating report from the Medical Media about that other perennial New Year’s resolution – wanting to lose weight.  There exist as many, if not more, diets as there are sure fire ways to “beat the market”.  The American Medical Association threw up its hands and opined that although all diets may work, the only one certain to do so is “the one the patient will stick with!”  We think that makes a lot of sense, and we try hard to design investment portfolios that “the client can stick with.”

2015 will probably be the year the Federal Reserve raises interest rates – very carefully (Source).  We expect that our US bonds and stocks will weather the change well, despite turbulence and dire headlines.

Europe is facing elections and economic uncertainty, making investments there very inexpensive.  Will we buy?  Yes, very patiently; recognizing that, with a strong dollar, it may take some time before we see excellent results from Europe or indeed any overseas markets.

Financially “what makes you happy” should be the knowledge that you are sensibly invested, in a variety of markets, that your money is growing as safely as possible where it should be, and that you have enough cash reserves and income for anything you need in the next year or two.

If you have questions, or need reassurance on these issues, just let us know.  “What makes us happy” is working with you to review and adjust anything to do with “what makes you happy” financially.

Performance By Asset Class

The chart above illustrates the comparative performance of the U.S. stock market (the four categories on the left) versus other aspects of a diversified portfolio (the four categories on the right).  The clear winner in 2014 was global REITS followed by the S&P 500 Index.  In spite of Media claims, active managers are not selected to “beat an index”; they are selected to protect asset values when (inevitably) the particular index declines!

One of the things you said might help “make you happy” is a report showing your results more clearly each quarter. We have enclosed a sample of the report that we anticipate using going forward.  Please note, this is just a sample and does not reflect your actual portfolio. We would appreciate your comments!

With All Best Wishes for a Very Happy and Prosperous New Year

Your team at Sharkey, Howes & Javer, Inc.

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