2013 market review

Pundits and prognosticators of the stock market were wrong again in 2013. Those who said last January that the market would decline erred; those who said it would rise modestly erred; and those who said we would see “good” returns erred, as well. The year in investments turned out differently from what they all said.

On the other hand, we made no such predictions. Although we are always optimistic about the long-term prospects for investing, we avoid making short-term calls. We know that’s a guessing game, and we’re just as likely to be wrong as right.

In January 2013 it was reported that most domestic stock market indices had advanced double digits the previous year. We were cautious as usual about what the year would bring and reiterated that our approach, which focuses on low-cost investments and asset allocation as its base, would continue to be best long-term.

We’re making the same bet now, for the future. And we are confident that long-term, if you follow our advice, you will end up in the winner’s circle.

Investors who stayed the course in 2013 were amply rewarded, as stocks did even better than they had in 2012. The bond market adjusted down due to generally rising interest rates, and emerging markets stocks struggled.

Here is how selected asset classes performed in the year, as measured by representative exchange-traded funds:

                                               4th qtr.             Year            3-yr. ann.

Asset class                               2013               2013              average


Large growth                                10.39%          32.48%            16.43%

Large value                                   10.17%          33.10%              15.73%

Small growth                                 7.53%           38.26%             17.02%

Small value                                   9.90%           36.55%              15.88%

Emerging mkts.                            3.06%         -4.92%                -2.71%

Developed foreign                        5.86%         21.83%                8.20%

Real estate                                    -0.87%           2.31%               9.34%


Treasury TIPs                             -2.16%            -8.49%              3.32%

Corporates                                   0.65%             -1.94%              5.70%

Reasons exist for optimism going into 2014: The employment picture has brightened, corporate balance sheets have improved, consumers are spending, and the biggest story of 2013, Obamacare, may turn out to be a non-story in 2014 – it can only be hoped.

As you may know, Mentor Capital’s services involve much more than investments. As trained and licensed Certified Financial Planners, we believe that a holistic approach to personal finance is best, one that takes into consideration issues like clients’ estate plan, cash flow, income tax management and risk management as well as investments. If you are not now a client, consider coming in for an initial consultation. If you are a client, we thank you for your business.