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12

Fund Family Shareholder Association

www.adviseronline.com

isn’t), but also that, having been beat-

en down, it is now ripe for recovery.

Where have I heard that before? I don’t

know if you remember the predictions

that the current decade would be a

golden one for metals, with gold mov-

ing to $5,000 per ounce. Well, we’re

now six years in, and we’re right about

where we started.

Precious Metals &

Mining

may have shot up 76.5% in

2009, but it wasn’t enough to recover

the prior year’s 56.0% loss, and the

fund has gone on to notch its largest

single overall loss since its May 1984

inception. In late December, the fund

was 75.9% below its May 2008 high.

Is that what you’d call a store of value?

Barring a catastrophe of global propor-

tions, I maintain my mantra that the

best investment you can make in gold

is to hang some around the neck of

someone you love.

Global Conundrum

I’ve always been a proponent of

keeping a chunk of your portfolio over-

seas, but as with our domestic stock

allocations, I think you need to be picky

OUTLOOK

FROM PAGE 7

>

about both who you’re trusting to invest

your money in far-flung markets and

how much you’re willing to give them.

In 2016, investors traveling into for-

eign stock markets are going to be

buffeted by continuing questions about

China’s growth prospects and the level

of trust that we can have in their report-

ing of such. And between China and

the global oil economy, the growth of

many emerging market economies will

hang in the balance. I wouldn’t be one

to jump into a fund like

Emerging

Markets Stock Index

or, for that mat-

ter, any of the region-specific foreign

LOOKING BACK

2015 Scorecard

A BIT MORE VOLATILITY, smaller gains and a focus on active manage-

ment all were good calls for 2015. I didn’t have lots of bad ones, but

even when I was right, you couldn’t always take it to the bank—though

active managers saved the day overseas.

As I do every year at this time, I look back and give an honest

appraisal of just how close my thinking was or how wide of the mark

I ranged when I wrote to you one year ago. You may not agree with

all of my grades, and I am sure to have made some other boneheaded

comments over the course of the year that you’ll hold me accountable

for, but usually I own up to them pretty quickly. As I’ve said before, we

can always hope that the light will finally shine through on the myriad

financial advisers, writers, pundits and glory-chasers who make wild

and wacky predictions all year long. I still seem to be one of the few

who actually fesses up on an annual basis. Last year, I gave myself two

thumbs-up and one up-and-down rating for my 2014 predictions and

comments. I looked a little better for 2015.

“The bias that…we’ll all need to be most conscious of as we enter

2015, is ‘recency bias’—the tendency to extrapolate the recent

past into the near-term future…If stocks went up, they’ll continue

to go up. If interest rates went down, they’ll continue to go down.”

After a year in which

Total Stock Market

returned 12.4% and

Total Bond Market

returned 5.8%, I’d say 2015’s returns of

0.3% from both index funds prove the point that a good year doesn’t

necessarily lead to another one—all other things equal. While I was

right to warn about recency bias, I’ll take a ding for my next one.

“I’m expecting a bumpier ride in 2015, but I still think U.S. stocks

can gain ground during the year.”

Okay, the ride was bumpier, for sure. The Dow saw 9

daily moves of 2% or more in 2015 versus just two in

2014, three in 2013 and four in 2012. S&P volatility, as measured by

the VIX, averaged 16.7 versus 14.2 in both 2014 and 2013. But with

price losses of 2.2% for the Dow index and 0.7% for the S&P 500

index, well, I was wrong. You have to look at total returns, like the

1.2% gained by

500 Index

, to see any improvement.

By the way, volatility was also up in the bond market. Over the course

of the year, the 10-year Treasury’s yield moved up or down 2% or more

from its prior-day close 109 times, which is more than all the days this

occurred in 2014 and 2013 combined.

“It’s only a question of when, not if, we’ll get a 10% correction or

more in U.S. stocks.”

For me, this was a no-brainer, though I think a lot of investors

had become so complacent about market setbacks that they

probably didn’t put too much stock in my warning. Too bad. If you were

prepared, then you didn’t panic when markets tumbled in August and

September. At its worst, the Dow was off 14.4% from its May high,

while the S&P 500 index was down 12.4%.

“Much-improved balance sheets mean there is plenty of

ammunition to continue spending, which in turn will move the

economy forward.”

You need only look at the sales of cars and light trucks to

know that the consumer was in a better frame of mind for

spending (and on sounder financial footing) in 2015 than in years

past. Automobile sales exceeded $1 trillion through November and

will almost certainly set a new record when December’s sales are

tallied up.

“It’s important to let an active portfolio manager make decisions

about where to invest and what to invest in overseas.”

Amen to that. My choice (and one I’ve stuck with for many

years),

International Growth

, lost 0.7% during 2015, while

Total International Stock Index fell 4.4%. In fact, a quick glance at

Vanguard’s foreign offerings shows that the active managers at

Emerging Markets Select Stock

beat out Vanguard’s EM index fund,

International Explorer

outpaced

World ex-U.S. SmallCap Index,

and both

Global Minimum Volatility

and

Global Equity

earned more

than

Total World Stock Index

. Not a bad call.