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2014 forecasts … and a grain of salt

By Sheyna Steiner ·
Friday, December 27, 2013
Posted: 6 am ET

'Tis the season for prognostications on what the new year may bring. That makes it an especially perilous time for investors.

It would be tempting to hitch your investment strategy to one of the many 2014 forecasts that have been spilling out of Wall Street. But that might not be your best move. Financial markets are stubbornly tough to predict. They've frustrated the industry's best minds for generations, leaving many with a healthy dose of skepticism at this time of year.

"Ignore all forecasts that are based on people's opinions: where the stock market is going, where interest rates are headed, where gold is going to go," says Larry Swedroe, a principal at Buckingham Asset Management in St. Louis. Swedroe is the author of the book "Think, Act and Invest Like Warren Buffett: The Winning Strategy to Help You Achieve Your Financial and Life Goals."

Instead of betting on the hot sectors of the coming year, stick to what's worked. Maintain a thoughtful and diversified plan, and don't be distracted by fear, greed or people who are trying to sell you something.

"The average person should be in low-cost index funds. They are probably the best thing to jump into," says Matt Orsagh, a director of capital markets policy at the CFA Institute.

The CFA Institute, by the way, just released its Global Market Sentiment Survey 2014. The survey asks members of the CFA Institute about their expectations for the year.

Among the findings:

  • Increasing numbers of investment professionals are confident that the economy will continue to grow. Sixty-three percent of CFA Institute members believe that global economic growth will expand – up from 40 percent last year.
  • Nearly a third of those surveyed believe that an easing of the sovereign debt crisis will have the most impact on the global economy, while just over a quarter say that growth in emerging markets could have the biggest impact.
  • Twenty-nine percent of CFA members believe that improved regulations are needed globally to bolster investor trust and preserve the integrity of capital markets.

Again, these are merely forecasts, and Orsagh cautions investors from giving them more influence than they're due. "This survey serves as one piece of the mosaic: just one of a number of data points you look at," he says.

Swedroe adds that long-term investors are usually best served by a diversified approach that takes into account their ability and willingness to bear risk. Investors should focus on the elements of their strategy that they can control, he says.

What are your investing plans for 2014?

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Follow me on Twitter: @SheynaSteiner.

Senior investing reporter Sheyna Steiner is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It's available at all the major e-book retailers.

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