With less than two months remaining in this year, let’s take a quick look into the future. Specifically, let’s consider what will be the best investments in 2014.
If the formula for investment success is to buy low and sell high, then it would make sense to look at what is currently on sale. Investors all too often get caught up with what has been going up lately and assume it will continue indefinitely. This ignores the fact that markets behave in a cyclic rather than linear manner.
By far, the best value today appears to be in the precious metals sector. After a two year correction within its 13-year bull market, gold and silver mining companies appear set to explode higher in value in 2014. Gains of 100% or more are probable in funds like GDX, GDXJ, GLDX and SIL–simply by returning to their 52-week highs. Individual precious metals stocks like ANV, AUMN an BAA could increase several hundred percent by returning to their highs of less than a year ago.
Most of the above funds and stocks appear to have bottomed in late June, yet almost no one wants to touch the sector. Although a new low is certainly possible in the short term, at some point in 2014 these assets are almost surely to be higher–much higher.
I believe the runner up for gains in 2014 will be emerging market stocks since they too became so undervalued in 2013. So far this year, my best-timed purchases were in single-c0untry funds like TUR, SCIF, IDXJ, VNM and THD in late August when emerging markets appeared to find their final bottoms for this cycle. I expect these funds to strengthen much more in 2014, just like the BRIC stocks did in early to mid 2008.
Based on the 20-year chart of the S&P 500 index below and many, many other indicators, it appears we are transitioning from a 5-year bull market into another crushing bear market.
The good news is that these transitions generally take several months to complete, with different asset classes reaching their extremes at different times rather than all at once. For instance, it appears that the VIX bottomed in March and defensive stocks like REITs, consumer staples and utilities peaked back in May. The general stock indexes are setting new highs now, so perhaps they will be the next to begin their decline.
In the 2007-2008 transition, emerging markets and commodities peaked several months after the general stock markets and I’m expecting similar behavior in 2014. There will certainly be a time and place to begin short selling and buying treasury funds to protect and grow your money when everything else is set to collapse, but we don’t appear to be there yet.
What will be the best investment in 2014? We’ll know for sure a year from now, but by most of the opportunity will have been missed. In order to buy low and sell high, one must first buy low. Unfortunately, this usually means buying when it feels scariest to do so. Successful investing requires one to overcome emotional urges and act based solely on logic. If you are looking for an investment professional to assist you in this way, I’d be happy to discuss that with you. Contact our office at 1-800-996-4687 to arrange an appointment.
Be sure to get your copy of our FREE report, “How to Protect and Grown Your Money Despite Any Global Crisis.” With what happened in Cyprus, Poland and the US this year, it’s never been more important to know what to expect and how to safeguard your savings.