Ready to meet someone with the heart of a teacher? Charles Kafoglis is our featured video this month and it’s worth a watch. Charles brings decades of client service experience from his days as a management consultant. Most recently, he has been working with teens and young adults to instill financial literacy skills, sorely lacking across all levels of our education system, helping them launch their careers with a sound financial foundation. He appreciates the value of listening, making a difference, and practical problem-solving. We think you’ll love Charles as much as we do!

When tackling big, audacious goals, you don’t need big, audacious actions. All you need is the contagious magic of micro-actions.

Let me give you an example.

When I travel, I often don’t feel like exercising, even though I know I’ll feel way better if I
do. So, in the morning, I don’t commit to a program to lose 12 pounds in twelve days or promise myself to run for 40 minutes. I just put on my gym clothes.

That’s it.

And then, since my gym clothes are on, I almost always decide to just walk to the gym and take a look.

What happens next is what almost always happens when I step into a gym: I see the bikes and think, “I bet it will feel good to get on one of those for a few minutes.” So I do.

And other exercises naturally follow that.

After I exercise, I think, “Man, it would feel great to stretch,” so I do that, too. And then, since I’m on a roll, I decide to eat a healthy breakfast instead of sugary garbage. Later at work, I’m extra productive since my body feels great.

See what I mean about contagious?

There’s a reason 80% of New Year’s Resolutions fail. The problem isn’t the goals, it’s the way we go about trying to tackle them. We try to go big and burn out, forgetting that “slow and steady wins the race.”

The magic here is in breaking down big, hard, sometimes even scary goals into attainable pieces. Find something small and attainable you can do, start there, and let the contagious magic of micro-actions do the rest.

At the beginning of each year, money managers and financial experts release many predictions around what the forthcoming 12-months will bring from an investing standpoint. But forecasts rarely pan out, particularly in a year as unpredictable as 2021. It is hard, if not impossible, to outguess the market.

So what is the Hill Investment Group take? We expect the US stock market to be up in 2022 between 6-10%. We also predict that the market will most likely not return between 6-10% in 2022.

You probably needed to read that prediction twice, as it seems to contradict itself. Let us explain.

Why do we expect the market to be up between 6-10% in 2022?

That probably seems too simple of a claim given the current market environment. As of the writing of this post, the total US market is at an all-time high; Omicron is spreading rapidly throughout the US, inflation expectations are higher than they have been in decades. Historically, the market has been up, on average, between 6-10% annually. Clearly, with all of these unique circumstances, we can’t expect this year to be like previous years, right?

That is the beauty of the market. Every year is different, and every year the market takes all of these factors into consideration when setting prices. Investors know all of the risks mentioned above, and the current price reflects a fair price for taking on those risks. No matter how you slice the historical data, the market is up about two-thirds of the time, usually between 6-10%. Whether you look at what political party is in office, what inflation expectations are, whether the market had a positive return the previous year, or even if the St. Louis Cardinals made the playoffs…These factors are incorporated into the current price and usually provide investors an expected return roughly between 6-10% over the long term for taking the risk of investing in the equity markets.

Why do we predict that the market most likely will not return between 6-10%?

Although the market, on average over the last roughly 100 years, has returned between 6-10% annually, it rarely returns within that range in any single year. About 1/3rd of the time, the market has had a negative return, about 1/3rd of the time a return between 0-20%, and about 1/3rd of the time a return above 20%. Dating back to 1928, the market has only had a return within two percent of the long-run average four times! Yes…only four times in nearly a century.

This is why we EXPECT the market to return between 6-10% but PREDICT that it most likely will not.

When investing in the stock market, the range of investment returns is much larger than the average return. This is part of what makes investing so hard and why many investors, especially those that choose to do it themselves, get scared and leave the market just when they should likely stay in…or vice versa. It is difficult to see the long-run average when dealing with such volatile swings year to year. However, when you take the long view, embrace our relationship, and think in terms of decades rather than years, you will start to see the benefit and ignore the year-to-year noise and volatility.

Data from Fama/French US Total Market Index