The new year may be 2020, but that doesn't guarantee a perfect vision of the future. In fact, the best we can hope for is something like a cloudy, 20/1000 vision of the future. That is not to say I don't have a few predictions to make, as well as challenges to issue on having the conviction to be a smart investor. Here they are:
1. The bull stock market will not last another decade.
The bull market began March 9, 2009, and is now the longest in history. Yet we are not in a new paradigm where stocks go up forever, just as in 2009 we weren't in a new paradigm when many believed that the stock market would take decades to recover. Stocks will plunge far more than the 20 percent required for a bear market. I just don't know when, or by how much they will rise before this happens.
Have the conviction to understand emotionally what such a likely scenario could do to your financial independence. Consider taking some risk off the table by shifting to high quality bonds or bond funds. Then, when stocks do tank, buy those stocks back when they are on sale. Simple — yes. Easy — not so much.
2. Many new financial products will be launched and virtually every one will have worked brilliantly.
When the financial services industry launches products such as new funds, it does what's called back-testing. The idea is to sell the consumer on how spectacularly these products worked in the past decade or two. But in the world of big data, it is child's play to run millions of scenarios to find strategies that worked in the past. Unfortunately, the vast majority will underperform the market going forward.