Before we look ahead to 2014, don’t shut the door entirely on 2013. Remember, you still have time to open an Individual Retirement Account for the 2013 tax year. If you need a deduction, consider a traditional IRA. If not, I strongly encourage readers to open a Roth IRA if they are eligible. Both the traditional and Roth IRA have a myriad of eligibility rules and regulations, so if you are thinking about contributing, be certain you’re indeed eligible. IRA accounts are often overlooked, but I truly believe they can play a vital role in retirement planning.
That being said, following what was a fairly productive year for many
investors, I expect to see a lot of negative headlines in the press and
on the financial television networks. The pundits will soon be putting
fear into investor’s minds. For example, I expect financial articles to
scream headlines such as “Are we overdue for a major market correction?”
or “How to prepare for the upcoming market downturn.”
Many of the newsletter writers will be out there forecasting impending
doom as well. I’ve already seen one guy advertising that he sold his $1
million portfolio and is going to advise everyone how to start building a
new one from scratch. Another predicts that the Dow will fall by 50% or
more. Don’t accept it for a fact.
Instead, you should take such scare tactics with a grain of salt. After
all, these guys are basically just trying to sell you newsletters and
will say what they need to say to get your attention.
The fact of the matter is that nobody can accurately and consistently
predict the future. Even the most successful investors will tell you
that trying to time the market is an iffy proposition. I wouldn’t let
short-term headlines dictate your long-term planning.
At some time during 2014, something is going to happen in the investment
world that will cause investors a few sleepless nights. In fact, there
will likely be several times over the course of the year.
But as I often say, you need to have an iron stomach and stay committed
to your strategy regardless of market conditions. Market fluctuations
are normal and often irrational. What causes the market to go down one
day turns out to be irrelevant the next. It was commitment to strategy
that rewarded investors in 2013 and I expect it to ultimately reward
them again in the years ahead.
I am excited about 2014. Yes, there are a lot of people out there who
are expecting a market correction following a powerful year. And they
may be right. It is possible.
But it’s also possible that the powerful rally will continue. Again,
nobody can say for certain, including the pundits in the media and the
newsletter writers. One thing is for certain, you need to prepare for
the upcoming year.
At a minimum, I suggest you review your 2013 year-end portfolio to
determine if you need to re-balance. Take a good look at the
contributions into your retirement programs like your 401(k). In other
words, get everything in order for 2014 and expect the unexpected. I’m
sure the New Year will have a few surprises, but don’t let them knock
you off your investment track.