By John Wasik
(Reuters) – The ongoing turmoil in world markets has made for a herky-jerky ride this year. What did you learn?
While most professional money managers expect stomach-churning volatility to continue, there’s no reason why you can’t still position your portfolio for safety, income or growth. Here are some mistakes to avoid:
1. Staying Out of the Market.
Sure, the market this year was crazier than selling snowballs to Inuits. But by staying out – and pretending you knew when to come back in – you missed plenty of profit opportunities. The Select Sector Utilities SPDR ETF , for example, offers a nearly 4 percent yield and has returned about 16 percent year to date through December 7.
The FTSE NAREIT Residential Index ETF, which samples real estate securities throughout the U.S., is up about 9 percent year to date with a 3 percent yield. The greater lesson is not that these funds did well – I’m not predicting they will do well in 2012 – but that diversification offers returns in a number of places. The “all in or all out” approach will deprive you of profits and you just can’t know where they will come from.
2. Ignoring Inflation.
While the current U.S. Consumer Price Index is running at slightly more than a 3 percent annual rate of increase, inflation has never really gone away. Just look at your medical expenses. Annual premiums for employer-provided health care plans rose 9 percent this year, according to the Kaiser Family Foundation. That’s three times the rate of general consumer inflation and more than four times the rate of wage increases. With inflation, everything is relative. If your essential expenses are outpacing your wage growth, you’re falling behind.