2022 ended with fears of a recession, rising interest rates, and higher and rising inflation costs. It was the first year in a long time where both stocks and bonds were down. “Experts” predicted more of the same.
2023 proved them wrong. A diversified portfolio, made up of broader asset classes, returned 12.8% for the year. US, International, and Emerging Market indexes, broadly, were up double digits. In fact, the S&P 500 even set a new all-time high!
Bonds performed well. Even cash — via ultrashort-term treasuries — earned a respectable 5% on the year. In other words, 2023 was a great year overall — for those who stuck with it.
Years like 2023 are why investors should not put much weight into market or economic predictions. Markets are noisy in the short run. Pessimism is fleeting. Discipline is key to surviving it.
Markets have a knack for recovering after a loss. The US market, in particular, has a 100% recovery rate. It doesn’t always happen the next year, but it does happen.
Markets are resilient. Investors should take comfort in that. The discipline to hold tight is as big a contributor to long-run returns as your portfolio’s makeup, if not more so. Continue Reading…