For the last few months, Christina White, has been in charge of the format & Content in our Weekly Commentary newsletter column…Thank you Christina! We thought you might also enjoy occasional summaries of various articles Marcy has been writing for the Baker City Herald and the La Grande Observer. The column is called Invest-i-Vision. Hope you enjoy the addition!
Where to Invest in 2015?
Investing is fascinating and at times overwhelming. Is the market too high? Are interest rates going up or going to stay down? Where is the best place to put my money? These are all questions I hear on a regular basis. There is no simple answer. An excellent starting place if you are investing for growth is by taking a look at what is currently doing well and perhaps more importantly, what isn’t doing so well.
Begin by looking at different components of the markets. The major market indexes are made of companies in different industries. The nine major sectors or industries are:
Consumer Discretionary
Consumer Staples
Energy
Financials
Health care
Industrials
Materials
Technology
Utilities
According to a recent article in The Economist, “The key to stockmarket success is avoiding the worst sectors”. They point out that, “global energy stocks were down 8.7% on the year (through Dec. 2, 2014), lagging nearly 31percentage points behind returns in the best-performing sector of the year, health care”. That seems like an awfully large difference. Interestingly enough the difference is fairly mild by historical standards. In 2013 the difference between the best performing sector and the worst was 39 percent.
The Economist has a hypothetical investor, named Felicity Foresight. According to their research Felicity would have earned a return of 66% since the start of 2007, had she simply steered clear of the worst-performing sector each year. The MSCI World index over the same period returned 32%, less than half the return. The examples continue with one of the most dramatic being in the late 1990’s, during the Dotcom Bubble. At this time the value of equity markets grew exponentially, with the technology-dominated Nasdaq indexing rising from under 1,000 to 5,000 between 1995 and 2000*. After the Bubble burst, technology stocks became one of the worst performers. The gap between the best and worst performers was over 100 percentage points…quite a difference.
The Economist article continues, “Get your economic calls right and the sectors tend to select themselves”. For example defensive sectors such as health care and consumer staples (things people buy in good and bad times) have been the best performers since the start of 2007.
At Vision Wealth Management, Inc. we continually monitor the economy and strong sectors and industries as part of our ongoing research and investment process.
Looking out for your Financial Future.
Marcy Haines CFP® is the president of Vision Wealth Management, Inc. in Baker City and a Registered Principal with, and securities are offered through, LPL Financial. Member FINRA/SIPC.
*Investopedia
MARKET WATCH
Please click on the link below to view the latest LPL Financial Weekly Market Commentary that provides an overview of the past week's market events and insight into upcoming market events. This weekly publication is authored by Jeffrey Kleintop, CFA, LPL Financial Chief Market Strategist.