How Did 2012 Turn Out For You?

I can’t help myself, I am constantly assessing progress. How well am I meeting the goals I have set for myself? How are my clients’ Financial Plans performing? How is the current year progressing against my expectations?

So when I wrote about looking towards 2012 with optimism, I was right in character with how I tend to look towards the future (although I really, really nailed my ‘Economy’ part of my forecast).

What may be telling though is in general I don’t focus on financial forecasts.


Because that’s the wrong focus.  While we can make some broad assumptions about a range of expectations, it’s a path marked with pain for one who attempts to forecast how the financial markets will behave.

The right focus is on your behavior with money.  And there’s no painless, magic formula there: Save until it hurts, make sure you are well diversified across the assets you are allocated in, and overall just stick to your (Financial) Plan and remember your goals.

It is interesting though to look back at the performance of financial markets. That is measurable and quantifiable (vs. projections).

OK, so how did 2012 turn out for the financial markets? For domestic, turns out they did pretty well.

Let’s just look at the S&P 500.  The S&P 500 is a relatively accurate harbinger, as it represents the 500 largest companies traded on the US stock exchanges, for example the New York Stock Exchange.

For 2012, the S&P 500 had a > 16% return. 16%!  That’s pretty good! Would be nice if it did that every year, wouldn’t it?

Since March 2009, the S&P 500 has had a return of almost 124%. Mind you March 2009 was at one of the lowest points the S&P has ever seen, but still, that’s quite a rally.

Did anyone see it coming in March 2009? Not many. Everyone was pretty well freaked out about the recent financial meltdown due partially to the real estate bust and associated securities. Which pretty much bled into almost all securities.

So if you stuck to your 2012 plan and had good diversification across your assets, it’s likely you had a positive return across your holdings.  Which is always nice to experience.

But don’t forget, it’s about the long term horizon, not the short term.

However there are always forward – looking anxiety-inducing reports; best to just ignore them and focus on your goals (sometimes easier said than done).