Traced over the course of the year, 2016 investing took on all the qualities of a board game. Now, the last turn is nigh: If you did well, it's easy to yawn contentedly, cash those dividend checks and declare victory.
And if you're a loser? Some would just as soon forget the board and consider walking the plank. But before anyone gets that rash (or cocky, for that matter), there's the reality of turning over a new calendar leaf: game over, new game.
What mistakes did investors make in 2016? Here experts weigh in on eight not-so-great gaffes that worked against them, but that thoughtfully reconsidered might turn those financial scars into lucky stars.
Betting against banks. If the conventional wisdom is to buy low and sell high, some investors clearly didn't adhere to the first half of the equation, especially with bank stocks. "After underperforming for years, bank stocks have outperformed the broader market since the election," says Dennis Notchick, a registered investment advisor representative with Safeguard Investment Advisory Group in San Diego. What's behind the sudden spike? "There's now the thought that higher interest rates and lower regulation will increase revenues for the banks."
Trouble with timing. Too often it's truly about bad timing, even for those smart enough to skip timing the market for a quick score. "Whether it's getting out too early or staying on the sidelines too long, people can be their own worst enemies," says Jaime Cowper, president of Unity Financial Advisors in Bingham Falls, Michigan. The remedy: Strengthen that strategy and get good feedback from an advisor. "Sometimes investors get caught up in the emotional roller coaster. Having a financial professional to help guide the way can make the difference."
Too feverish on health care. Election years can rattle many sectors, but perhaps none more than health care. And in 2016, sitting things out was a prescribed course many investors ignored. "Tweets from Hillary Clinton and drug price control rhetoric from other presidential candidates drove pharmaceutical and biotech valuations lower in 2016," says Andrew Wetzel, senior vice president and portfolio manager at F.L.Putnam Investment Management Co. in Wellesley, Massachusetts. "While the drug stocks rallied on Trump's election upset, the overall health care sector has underperformed the broad U.S. market by more than 13 percent in 2016."
Gutted by gut feelings. When instinct ignited fear, portfolios took a fearsome hit. "Anyone who panicked and sold into periods of market turmoil locked in losses that would've otherwise been erased if they had stayed invested," says Jarrett F. Solomon, director at Connecticut Wealth Management. At the beginning of 2016, panic about falling oil prices and a slowdown in China prompted the worst 10-day start in stock market history. But after a drop of more than 10 percent, "those losses were quickly erased as investors realized that their fears causing the selloff weren't supported by economic data," Solomon says.
Sector pessimism. The market's lousy open blinded many investors to sector rebound. "The biggest mistake was letting extreme negativity in the first two weeks of the year affect their judgment about attractiveness of the equity market," says Yale Bock, a portfolio manager on Covestor and president of Y H & C Investments in Las Vegas. A partial list of areas left for dead included energy, gold, large emerging markets dependent on exports, retail and luxury items. As Bock notes, "These areas have seen nice gains, and in some cases, tremendous results."
Fearing the economy. The Great Recession has been history for some time, but judging by how some investors pressed their faces to the rearview mirror, you'd never know it. "The No. 1 mistake of 2016 was expecting the economy to be frail and fail," says Rob Lutts, president and CIO of Cabot Wealth Management and author of "The Great Game of Business: Investing to Win." "That was a widespread expectation throughout most of the year, but it didn't materialize. The economy did not roar in 2016, but it did not whimper out."
Chasing yield. You could call this the equivalent of Rover gunning to chomp the hubcaps on a speeding Ferrari. "With interest rates falling to all-time lows, people were looking for any kind of yield," says Tim Courtney, CIO of Exencial Wealth Advisors in Oklahoma City. "Investors flooded the utilities, consumer staples, high-yield and REIT sectors with money, and this forced the valuations of these areas to near historical highs. However, interest rates turned around and went higher and now those areas look horrible."
Reluctance to ring out the old. Investors take heart: 2017 is meant for turning old mourning into a new morning. "It doesn't matter what your performance was looking back," says Rusty Vanneman, chief investment officer of CLS Investments in Omaha, Nebraska. "Only do what's right for your portfolio moving forward based off your unique situations and objectives." As for current events, "It always seems like the world is a scary place with so many threats. Yet progress moves forward -- and investors are fortunate to have the opportunity to participate in that growth."
A former longtime staff writer, editor and columnist at the Chicago Tribune, Lou Carlozo writes about investment for U.S. News & World Report, and personal finance for Money Under 30 and GOBankingRates. He is based in Chicago. Connect with him at linkedin.com/in/loucarlozo.