Before we look ahead to the new year, let’s take a moment to celebrate 2024! The stock market enjoyed fantastic growth, advancing by 24% for the year. As we enter 2025, many investors find themselves wondering how stocks will perform this time around. You’ll find countless articles predicting which stocks will work, what sectors to buy, and the list goes on. Let’s revisit how some of the big boys did last year:
Keep in mind these are the biggest financial institutions on the planet, with highly decorated teams of analysts from Ivy League schools with endless credentials:
A massive swing and miss…and this wasn’t an anomaly! Click here to read how poorly the forecasters did heading into 2023. These random guesses are clickbait marketing tactics, and should not be considered advice.
What's the lesson here? Don’t fall victim to the headlines. No one knows what stocks will do next, not even the biggest and brightest companies. Tune out the noise & develop your personal plan and strategy.
First, its critical to accept the fact that the future is unknowable (see terrible forecasts above) and diversify yourself accordingly. This means different things to different people, but generally speaking, allocate your long-term dollars (money you won’t use for 10+ years) to stocks. And if that amount feels too aggressive, add some bonds to cushion market shocks.
Beyond these basics, consider investing based upon probabilities, not possibilities. Let me explain: While it’s possible the market could lose 25% because of <insert your largest fear here>, it isn't statistically probable. My investment approach is evidence-based, meaning I research how markets have performed in order to make decisions for today.
I don't make predictions, as you can gather. But, here are two separate blog posts from last year that leaned heavily on the probability of 2024 being a strong year. This was based purely on probabilities...
In other words, I won’t guess when the next market drop will occur; instead, I’ll try to explain risk through the lens of probabilities. Let’s look at some numbers:
Stocks have been far more likely to go up in any given year than down. Use this to your advantage!
During its “up” years, the market has averaged +21%, while the average loss in “down” years has been -13%.
Figures going back to the Great Depression era may not feel relevant, but recent data tells the same story. The past 10 years have posted an average return of 13%. This period also included 2 bear markets:
How the market performs this year and into the future is out of your control. Focus your energy on building a plan that accounts for good markets as well as bad ones. Don't allow yourself to fall victim to the headlines, and understand how probabilities will serve to your benefit. It is highly probable that the market will drop by 10% or more at some point in 2025 (this occurs about once every 11 months). Knowing this information beforehand should help you avoid irrational decisions in the heat of the moment!
We generally serve families with $500k or more in retirement/investment assets. Our clients are seeking a trusted advisor to oversee investment decisions and retirement planning. Schedule a meeting to explore our services:
Schedule a Call
.png)