Ever notice how some investors, no matter how the markets perform or the economy fares, will seem to come out ahead? Two key principles to keep in mind are: diversify your investment portfolio and keep emotion out of your investment decision-making. Case in point: 2014 was a year in which the US market rallied, posting major gains for some investors while penalizing others – especially those who made any of the following five investing blunders.
1) Crude Oil
Consumer spending and overall auto-owner-happiness have been buoyed by increasingly lower gas prices in the last quarter of FY14. Based on reports of surplus and robust US production of crude, the price per barrel has dropped off from its high of $110 to just below $60 per barrel. Those heavily vested in oil and other energy and commodities-weighted stocks suffered huge losses. Brazilian oil tycoon and seventh richest man on the planet, Eike Batista, lost $33 billion over 16 months due to tanking oil prices.
2) Russian Equities
The 2014 Crimean conflict between Russia and Ukraine resulted in punishing economic sanctions and a precipitous slide in the value of the Ruble in emerging market currency rankings. The US and European Union-imposed sanctions, including financing restrictions and export bans in addition to the drop-off in oil prices, have been disastrous for the world’s largest energy-exporting nation. For investors holding paper in Market Vectors Russia Exchange Traded Funds (ETFs), 2014 was a rough year, seeing stocks lose almost a third of their value.
3) Short-Selling US Treasury Bonds
Treasury bonds, usually a safe pick for a stable investment, turned out to be a bad short sale in 2014. This 2014 stock investing strategy proved a big loser for those looking to short their US treasuries, especially through leveraged investments such as TBT, in light of a Federal Reserve interest rate hike that never materialized.
4) Foreign Currencies
The US dollar posted gains in 2014 against sluggish or declining rates of growth in other countries. The emerging economies of China and India underperformed and underwhelmed investors who opted into investments backed by US currency. In a globalized market dynamic, this linkage in currency valuation made foreign currency investments a softer return for investors.
5) Bear Market Funds
Investors looked at 2014 one of two ways: as a slow year with sustained and continuing market growth or as a year in which market corrections would contract and diminish previous gains. Looking at today’s positive numbers, it is clear that the bullish optimists came out on top in this equation. Cautious stock investors who relied on volatility-tracking investments and bear-market reliant funds lost out big in 2014.
Nobody can predict the future. The best investors though, are smart enough to plan for both the known and the unknowable. Chuck Price, the Financial Doctor and author of Investing Simplified, wants to make sure you’re aware of the unknown, because he believes, what you don’t know, can hurt you. The book is designed to demystify the finance and investment industry, so anyone can develop a long-term strategy and take control of their overall finances.