My “No Prediction For Next Year” Letter: 2022 Edition
Was it just me, or did 2021 go by fast?
Now that it’s January, about all the investment industry firms are posting their predictions for financial markets in 2022. Not at Iowa Wealth Management, though. We don’t make predictions on the direction of financial markets, the economy or what numbers to play in the lotto. Our reason is simple; we don’t know where financial markets are headed, nor the economy, and we certainly don’t have any idea what lotto numbers you should pick.
By-the-way, none of the other financial firms know the answers to these questions either - they simply continue to write predictions because it gets them in print, onto electronic media and because the investing public find them entertaining. Folks, it’s marketing and as marketing goes, it’s a little too close to carnival barking for my tastes. So, we don’t do it here.
Financial Advisory is a profession, a profession backed by countless years of research into the gyrations of financial markets, and our predictions for their outcomes have no real benefit to the investing public. Here’s what our profession knows about 2022: it’s going to get weird, stuff we don’t know or expect is going to happen and you should be ready. In other words, 2022 is going to be like every other year since the dawn of modern financial markets (about 150 years or so) in that the unexpected will most likely dominate what historians put pen to paper about.
This time of year, I would suggest investors not waste time on what investment firms are predicting, but rather on what the investor should know about their own investment assets, such as:
1) Is this account for investing or speculating? Additionally, is this account being managed in a manner conducive to that goal?
2) Do I need any of the money in this account for my household cash flow or gifting this year? If so, will that distribution be provided for by the income of the account, or the hoped-for appreciation in the account (if the answer is the hoped-for appreciation, you’ve just begun the process of speculating, so go back to question #1)
3) What is the insurable need my policy premiums/assets provide for? Simply ask yourself if you still need this coverage. If the policy in fact has an insurable need, does the policy still meet the full need? Is it possibly over funded? Too much funding in an insurance asset can be an expensive form of asset management, or in some cases, an unnecessary speculation on a family member’s health or life expectancy.
While others ponder the effects of the moon’s cycle upon mid-term election year financial markets, we suggest clients focus upon the basics. Know why you are investing. Know where your cash flow is going or needed and know how your insurable needs are being met and at what cost. That’s the important stuff to know…. before things get weird.