Steve Forbes, of Forbes magazine once said, "You make more money selling advice than following it. It's one of the things we count on in the magazine business -- along with the short memory of our readers."
Over the years, I’ve poked a lot of fun at stock market predictions. Most of them prove wrong. I own a diversified low-cost portfolio of index funds. When it comes to my money, I don’t like to mess around. But I’m not against others making calculated moves with small sums of money. I’ve been writing my AssetBuilder column for nearly five years. Nine of my stories gave warnings or predictions. Let’s take a look at my report card.
On December 31, 2012 I wrote Why We’re Headed For Decent Market Returns Ahead. At the time, the Dow Jones Industrials traded at 14X trailing earnings. That’s another way of saying the DOW’s PE ratio was 14. That’s roughly in line with the 100 year historical average. I didn’t know how stocks would perform. But I estimated, based on price to earnings levels, that stocks had room to run.
Since December 31, 2012 the S&P 500 has gained 65 percent.
On August 21, 2012 I wrote Do You Have An Interest In Higher Foreign Cash Yields? This was a warning. Dividend yields for U.S. stocks were low. U.S. bond interest rates scraped along the floor. High dividend yields for some Canadian stocks (which trade on the NYSE) tempted some Americans who looked for easy cash.
When I wrote the column, $1 U.S. was equal to $1 Canadian. That wasn’t normal. The Canadian dollar usually trades at about 85 cents. I said it would again. Americans looking for a risk-free cash fix shouldn’t look abroad. Currency risks are real.
Since I wrote that column, the Canadian dollar has dropped 26 percent. A high dividend yield wouldn’t have softened such a loss.
But in March of this year, I wrote why Bargain-Hunting Investors Should Take A Look At Canada. The Canadian dollar, which had previously traded high (compared to the U.S. dollar) had now fallen far below its historical norm. CAPE levels (cyclically adjusted price-to-earnings ratios) for Canadian stocks were also among the lowest in the world. It’s early days yet. But since I wrote that story, the iShares MSCI Canada ETF (EWC) is up 8.88 percent. Vanguard’s S&P 500 index (VFINX) has gained 6.0 percent.
On March 3, 2013, I wrote The Rise And Stall Of China. I explained why I wouldn’t buy a Chinese stock ETF. China, I said, is big on promise but bigger on corruption. Since I wrote that column, the iShares China Large Cap Index (FXI) has dropped 0.28 percent. By comparison, Vanguard’s S&P 500 Index has gained 41.8 percent.
On November 4, 2014, I wrote The World’s Best Investment Strategy That Nobody Seems To Like. It’s called the Permanent Portfolio. Since that story’s publication, the Permanent Portfolio has gained a total of 11.69 percent. That compares to Vanguard’s Balanced Index Fund, which has gained 9.72 percent and Vanguard’s S&P 500, which gained 11.7 percent. I don’t prefer the Permanent Portfolio over a diversified portfolio of low-cost index funds. But as I mentioned in my story, the method has merit.
On July 13, 2015 I wrote Russia’s Stock Market Index Is A Swing For The Fences. Russian stocks were cheap, based on CAPE levels. The Van Eck Vectors Russia ETF (RSX) is up 5.80 percent since that story’s publication. That compares with a 3.81 percent gain for Vanguard’s S&P 500.
On August 18, 2015 I wrote The Foreign Stock Index That’s Priced To Jump. Singapore’s stock market index also traded on the cheap. But so far, its stocks haven’t jumped. The iShares MSCi Singapore Index (EWS) is down 3.94 percent since that story’s publication. Vanguard’s S&P 500 Index, by comparison, gained 2.33 percent over the same time period.
On October 5th, 2015 I wrote Why I’ve Changed My Mind About Emerging Market Stocks. I wrote, “Emerging market stocks have had a tough time lately. During the 3 years ending September 10th, Vanguard’s Emerging Markets Index (VEIEX) has dropped almost 10 percent, compared to a 45 percent gain for the S&P 500. Anyone rebalancing a diversified portfolio should now be adding money to emerging market shares.”
Since my story’s publication, Vanguard’s Emerging Market Index (VEIEX) gained 14.45 percent to October 7, 2016. By comparison, Vanguard’s S&P 500 Index (VFINX) gained 12.72 percent.
On September 21, 2015 I wrote Why You Shouldn’t Give Up On Value Stocks. Growth stocks had been thumping them. But I wrote that fortunes can reverse. Since the column’s publication, Vanguard’s Value Index (VIVAX) has gained 14.23 percent. Over the same time period, Vanguard’s previously red hot growth stock index (VIGIX) gained just 10.9 percent.
As I mentioned before, all of my money is in a diversified portfolio of low-cost index funds. Nobody can predict where stocks are headed. Not me. Not Warren Buffett. Nobody.
But for those who read my warnings or like to roll some dice, I’m happy to report that I’ve earned a passing grade.
Andrew Hallam is a Digital Nomad. He’s the author of the bestseller, Millionaire Teacher and The Global Expatriate's Guide to Investing: From Millionaire Teacher to Millionaire Expat.