Monday, January 3, 2011

2010 Investment Hindsight

The final numbers are in for 2010.  The best investment advisor on the planet is Mr. Hindsight. If I could hire him to manage my portfolio I would.  He is much more reliable than Ben Graham's Mr. Market.

Dow Jones Industrials                      +11.0%
S&P 500                                          +12.8%                           
Russell 2000(small caps)                 +25.3%
MSCI EAFE (international)             +  4.9%

LT Barclays Treasury Index             +9.4%

Gold                                                 +29.8%
Silver                                                +83.7%
Corn                                                 +51.7%
Wheat                                               +46.7%
Cotton                                               +91.1%
Coffee                                               +76.9%
Crude Oil                                          +15.1%
Natural Gas                                       -20.9%

Dollar vs. Euro                                  +7.1%
Dollar vs. Yen                                   -12.8%
Dollar vs. Canada                              -5.1%
Dollar vs. Yuan                                  -3.6%

I think most investors would be more than with satisified with the 2010 stock and bond performance if they could have those returns every year.  Unfortunately, it doesn't work that way.

Despite all the press about gold prices, silver was the place to be in 2010.  However, if you really wanted to be in high cotton, you should have owned cotton.   For the record, I did not corner the market in silver in 2010 and the only cotton I bought was in my shirts and shorts.

Forget the hindsight, what does Mr. Market say for 2011?  Where should you put your money? John Bogle, founder of the Vanguard Group, told Money magazine (Jan/Feb 2011 issue) that he thinks "this is the most difficult time to invest in my career".  Since that career goes back 60 years that is saying something. In a lot of ways we are in uncharted waters that even Admiral Bogle sees as treacherous.

Far be it from me to give anyone investment advice because I don't have a clue where things are going.  My only suggestion is that you make sure you are well diversified.  Most people I know do not have enough international stocks. They do not have enough small cap stock exposure (especially small cap value).  They often do not have a good balanced fund (that has exposure to both stocks and bonds).  Most do not have any gold or silver as longer term "portfolio insurance".  If you are looking at your portfolio for 2011, you might look at these areas first to see if you are well diversified.

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