So you missed big gains in 2013: Now what?

Look before you leap, and review the status of the bull market. Here are the questions to ask.

By Benzinga Dec 12, 2013 4:27PM

Image: Broken-Pencil (© Christian Zachariasen/Jupiterimages)By Dave Moenning


To be sure, it has been an interesting year in the stock market. 


At the beginning of the year, almost no one saw gains of 20 to 30 percent for the stock market indices and most macro players continued to believe that the next crisis was right around the corner.


And yet with just a handful trading days left in the year, the S&P 500 (SPY), DJIA (DIA), Russell 2000 (IWM), and Midcap (MDY) indices all sit near all-time highs while the Nasdaq (QQQ) composite remains near the highest level seen since the tech bubble burst in the spring of 2000.


Worse yet for those who saw the glass as being at least half-empty 12 months ago, is the fact that 2013 did not provide many decent entry points.


Uh, it's a bull market

The fast-money types almost universally believe that the stock market is mean-reverting animal. Trends don't last and prices will always pull back to some special level that only they can see. "Buying strength is for chumps -- the smart money waits for a pullback to take a position" seems to be the battle cry among this crowd. How many times have you seen the geniuses on TV say, "We can't buy that here; wait for prices to come in."


Except, wait, oh, that's right, calendar year 2013 offered exactly two "dips" worthy of purchase -- and both came at times when there was a decent amount of uncertainty 

about the sustainability of the market's gains. In other words, it's been tough to get in. 


And because of this fact, a great many managers -- especially the two-and-twenty crowd -- have dramatically underperformed again this year.


Perhaps the key thing that many of Wall Street's masters of the universe got wrong this year is the fact that it's a bull market.


Despite the fact that there were two devastating bear markets (where the S&P plunged more than 50 percent both times) in the nine-year period between 2000 and 2008, the simple fact is this is how a bull market tends to act. Yet, unless an investor has been at this game for more than 15 years, they may not be familiar with the concept.


Advice providers experiencing gain regret

But one question: How's that static diversification doing? How's that exposure to the bond market, gold, and the emerging markets working out this year? The answer is that clients seem to be complaining about the money they didn't make this year. It's a little something known in the business as "gain regret."


Look before you leap

So here's the dilemma. A great many investors have missed out on some very good gains this year. And given that 2014 is right around the corner, it's time to make plans regarding next year's strategy.


Given that the tenets of behavioral finance are clearly in play here, it is a safe bet that many investors are going to want to up their exposure to the stock market in 2014.


Unfortunately, this is called "performance chasing" or investing in the "hot dot." In short, using such an approach is fraught with danger as investors wind up "buying high" and then "selling low" (giving up on a strategy or position if it doesn't do what they expect). And anybody with a functioning calculator can attest, such a strategy doesn't tend to work out very well.


Questions worth asking

So, before investors decide to make up for their mistake of being under-invested in the U.S. stock market in 2013 and bomb in for 2014, they may want to review the status of the bull market.


Some questions worth asking at this stage include:

  • How far do bull markets tend to go?

  • Are stocks overbought?

  • Is the market overvalued?

  • What's the risk?

  • When might the next bear show up?

Read more from Benzinga

62Comments
Dec 12, 2013 9:13PM
avatar

"Some questions worth asking at this stage include:"

7)  When will the FED stop dumping counterfeit $83 billion a month into the market?

Dec 12, 2013 9:59PM
avatar

Wanna know when the market's topped? It's when the shills come out in force urging us rubes to buy.


Wanna know the "secret" to successful investing? It's too boring to write about, no money in it for the shills either. And everybody knows what it is too. Allocation, allocation, allocation. Pick a risk tolerance, and re-balance annually. It forces us to sell high and buy other stuff low.


But like I said, it ain't sexy enough to write about. Works though.

Dec 12, 2013 9:06PM
avatar
For some reason Benzinga wants to act like what happened in 2008 had anything to do with normalcy or predictability. The last market "downturn" was not a real downturn, not a market correction, or anything that had anything to do with the value of companies in the stock market. The market downturn was in response to the biggest swindle of all time, perpetrated by investment firms themselves in the form of the packaged investment vehicles that turned out to contain crappy real estate loans that went bad. This swindle unfortunately affected everyone. The current market is controlled by a very small group of "investors" who really aren't investors in the real sense of the word. When you realize that 10% of the people control 90% of the movement in the market, the daily ups and downs lose all meaning. Little investors either get in for the long haul or get out. They control nothing.
Dec 13, 2013 11:24AM
avatar

The simple truth of investing is "no one can tell you when the market will go up or when it will go down, with 100% accuracy".  The best thing is to develop your plan based on solid investment advise and knowledge.  Set your risk tolerance and stick to it.  Don't let the opinion of others or fear, make you depart from a solid plan or increase your risk.  A solid plan will get you to your retirement goal.  Remember you invest for Direction, not Perfection. 

Dec 13, 2013 12:38AM
avatar

Some questions worth asking at this stage include:

 

How far do bull markets tend to go?  Four years (2010 to 2013) then 1 year bear 

Are stocks overbought?  Yes

Is the market overvalued?  Yes

What's the risk? Extremely high

When might the next bear show up? Next week

 

google on david stockman bloomberg and watch the videos - mainstream and a voice of reason.  we booked (locked in) 90% of our sizable profits for the year on Monday and will go to parties and sip grand marnier with beaming clients until 2014 begins.  MFC was gracious enough to buy all of our stock holdings at these record highs - he doesn't mind being the "buy high" sucker.  happy happy old year

Dec 14, 2013 7:24PM
avatar
This article was written for me. I missed the whole damn thing. I remember getting a call from my brother -in-law late Oct. 2012.. He said buy some Clearwire CLWR. It's .82 cent.. He went on about how it had spectrum and how sprint was looking to buy them out.. He read it on seeking alpha.. I told him I was going to put 100k into and open my Scottrade Account. NEVER DID. Sprint bought them out in April for over 5 bucks a share.

My brother-in-law called me in February 2013 told me about Alcatel-Lucent   ALU and Riteaid RAD. He said if he had 30k he would put it in Riteaid that day.. I told him I would look into it.. NEVER DID.  ALU and RAD up over 300% this year..

The entire summer past me by and I had my thumbs up my yass and although I maintained a list of stocks to invest in, I never took the step and just got in. Almost every stock on my list was up at least 50%.

I just opened my account in October 2013. I have missed it all. If going by the most conservation returns of 50%, on the money I have allocated to invest, I missed 140 - to 180k after taxes..

I kick myself daily bc this year went by so fast and it was like a haze was over my eyes.

So what do I do now? Janet Yellen being a rookie Fed Chief and the first woman at the post (although on paper she is the most qualified nominee considered for the post) may not want to make too many waves because of the glass ceiling and such.. The FED tapering could take the whole year (2014) to whine down. She would be under siege and second guessed if the market tumbled and we still have the stagnant economy of today. The stock market is the only (or the brightest) bright spot. If she takes that away, she'll be scrutinized more than the President and the Roll out of the ACA.

I doesn't look like the Rethugs gonna shut the Gov'ment down this spring if they get that budget deal signed into law that passed the house. Other than some unforeseen event, the bulls gonna be running in 2014.

But this is me talking. The guy that could have spit at any stock in October 2012 and I would have an extra 100k in my pocket right now. Seems like if I got into the market now, I would end up losing all my hard earned cash. The sky might fall or some chit just by me being in the market. Make a plan and do the opposite of what I think would work.  At any rate,  I made a whole 12 bucks keeping my $ in a savings account. That was for a calendar year. FRACK!   


Dec 13, 2013 2:56PM
avatar
The market is nothing more than a game of musical chairs,and when the music stops..you had better pray you can find a seat,because NONE of the insiders will be left standing,and they don't care at all how much YOU lose.   Forewarned is forearmed.   The music can stop at any time…it's THEIR game after all..
Dec 13, 2013 2:20PM
avatar
Unless you cash out now and stay out you won't realize any of these phony on paper gains. In the next crash they will all evaporate anyway. None of these stocks are worth any more than they were 5 years ago. This pumping of stocks was all done to in an attempt to make the banks solvent.
Dec 13, 2013 3:43PM
avatar
Fatty DON'T be calling other people names like Retardo, That one or El Retardo is mine..Isn't it ?
Dec 13, 2013 3:41PM
avatar
ABS's racism good.....Fatty Cakes' racism bad..
Dec 13, 2013 10:40AM
avatar
Well, I didn't miss the gains, and I was still diversified.  Never owned gold, my emerging market investments (small cap fund) actually did great this year, beat the S & P.  I admit my bonds were a bit of a drag, but they are basically flat.  I'm taking profits this month, as I did several times this year.   Not bad for a forum moron eh Fat Cat?
Oh and by the way if you are pissed you missed out on gains, don't chase them out of anger.  Right now staying safe with a wait and see attitude is what I recommend.  The taper starts in March, many including myself have guessed this.  It will be slow, 5 billion less purchases a month until it reaches 0.  Doom and gloomers are wrong, as usual.
Dec 13, 2013 3:40PM
avatar
A Sharp....Don't think that guy made it off that curl, did he ?
Dec 13, 2013 12:20PM
avatar
Gee,  How much money do you make - writing outstanding trivia like this???
Dec 16, 2013 3:07PM
avatar

Y'know what cracks me up?  A "genius" who slams others for taking the risk of losing their shirt or experiencing "gain regret" by not buying, then asks questions like "how far do markets go" and "are stocks overbought" without venturing any kind of an answer.

 

In other words, buddy, your 20-20 hindsight is apparently about the same as everyone else's.. except you don't have the nuts to squeak up about what might be to come.

Dec 13, 2013 2:19PM
avatar
How are the three legged milking stool wars going?
Dec 13, 2013 9:49AM
avatar
Wow , those questions are amazing.

Where did you come up with that wisdom, now I know what to do in '14.

All joking aside, can ANYBODY write a comment piece and have it posted here like they are experts ?

That advice is like telling someone not to eat yellow snow.
Dec 13, 2013 11:14AM
avatar
So now what? Make a new beginning. It's never to late to get smart, stop gambling, and start investing.
Dec 13, 2013 12:58AM
avatar
 You missed what oh still the lowest labor participation rate since 1978 and a trillion each year of wall street welfare. This is great this Land of homo Obozo's lesbian marines who cant carry a box of ammo and the Ultra Rich On Welfare...................As you the brainwashed moron democrat cant figure out why Al Gore buys mansions yachts and private jets..........Oh you poor little used fool the class warfare voter so captive by the propagandist your head must hurt. Oh never mind democrats it's all for you the little guy LOLOLOLOLOLOL!!!!!! Now please can we deal with the obese welfare collectors stranded in a food desert ????<$><$> Nighty night chicken little perhaps AL will buy you a little peasant car powered by some mysterious fuel there feel better "little" guy? Shhhh sleep well some mean old butchy dyke is struggling with a box of ammo right now in your defense so your perfectly safe.....SHHHHH nighty night and swallow this shiny pill it's free from the government. Oh if there is a fire wait for the Lesbian fireperson to ask a Man to raise the latter and come save you there feel better? SHHHHH Nighty night my socialist moron nighty night.
Dec 13, 2013 11:15AM
avatar
BTW, don't miss the MR FAT CAT XMAS SPECIAL where I'll gloat about how rich I am and how poor and stupid you are!

Har har har
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

104
104 rated 1
252
252 rated 2
457
457 rated 3
639
639 rated 4
495
495 rated 5
538
538 rated 6
704
704 rated 7
503
503 rated 8
350
350 rated 9
140
140 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
EOGEOG RESOURCES Inc10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.