Tags: Clements | risk | investing | stock

WSJ's Clements: Focus on Risk for Investing in 2015

By    |   Monday, 22 December 2014 03:00 PM

As the year comes to a close, you may be plotting an investment strategy for 2015. In doing so, you should put a central focus on containing your risk, says Wall Street Journal columnist Jonathan Clements.

The S&P 500 index stood at 2,075, just 4 points away from it record high. And the 10-year Treasury note yielded 2.16 percent, not far from the 2012 record low of 1.43 percent.

There are two rules to keep in mind when investing — "Never trade based on a market forecast and design your portfolio so that short-term results don't matter," he explains

"The implication: if you think you might panic and sell during a market decline, you should sell now, while prices are still at lofty levels," Clements writes. "Few investment mistakes are more damaging than dumping stocks at the depth of a bear market."

Any money you need for spending in the next five years shouldn't be invested in anything riskier than short-term bonds and certificates of deposit, he says.

And if you've already saved enough to cover your needs through retirement, you may want to shrink your stock weighting, Clements writes.

"Instead, to lock in future spending power, consider building a laddered portfolio of inflation-indexed Treasury bonds, whose maturities match your expected need for cash."

Meanwhile, MarketWatch columnist Jeff Reeves offers several themes to keep in mind next year.
  • "U.S. valuations aren't excessive," Reeves writes. "According to FactSet, the forward price-to-earnings ratio of the S&P 500 now is 16.2, the highest level since 2005. However, that reading is basically on par with the 15-year average, so this isn't a sign for panic.
  • Tech presents growth opportunity.
  • "Financials looking fit." Banks have vastly improved their financial health since the 2008-09 financial crisis.
  • U.S. dollar will stay strong amid U.S. economic strength.
  • "[Baby] boomers are a sure thing." That creates an opportunity for investing in countries that serve this demographic, such as healthcare and insurance companies.

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As the year comes to a close, you may be plotting an investment strategy for 2015. In doing so, you should put a central focus on containing your risk, says Wall Street Journal columnist Jonathan Clements.
Clements, risk, investing, stock
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2014-00-22
Monday, 22 December 2014 03:00 PM
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