January 10, 2014


Dear Friends,
My team and I are considering how to best serve your needs in 2014. We thought of starting a blog that would be an edited transcription of my weekly podcast. But blogs are supposed to be short and invite comments. Between answering comments and questions onMarketWatch and the dozens ofemails I receive daily, I simply can’t do justice to an additional avenue.

This is where you come in. We know that only a percentage of people listen to podcasts, while others prefer to read. We want to make Sound Investing available to everyone. We need your feedback. Our next newsletter will include a very brief survey to solicit your valuable opinion. Meanwhile, to give you a sense of how this week’s podcast would be presented in written form, please read below.

On a separate note, I thought you might find interesting this 3-minute video about 2013 Nobel Prize winner Dr. Eugene Fama. His work is one of the reasons I think the DFA funds are the best in the industry.
Now, here is the first edited podcast transcription..
At the start of a new year it seems appropriate to review what happened in last year and consider possibilities for 2014. I offer this in the hope of helping you develop reasonable expectations about what might happen in any particular period of time.

I know what happened in the past year, and so do you. But if you look back at the predictions, most people got it wrong. Most experts saw 2013 as a year where there would be limited positive returns.

For example, the head analyst at Vanguard predicted a 6 to 7% return. In fact, in a number of surveys they found that, on average, people predicted 7 to 10% return, so 2013 was not expected to be a great year. And many expected it to be a catastrophic year for those in the fixed-income arena because they thought that interest rates were likely to skyrocket as the government pulled back from pumping so much money into the system. It was also anticipated that gold would continue its long-term uptrend and, by the way, gold does not have a great “long-term uptrend;” it’s had a recent uptrend over the past 5-10 years.

So, let’s look at what really happened and what I predicted at the beginning of 2013. I realize I’m not sticking my neck out when I say this, because all I was predicting – or am predicting for the future – is that there are probabilities that things can work for you or against you, and that in a broadly diversified portfolio there is a likelihood in most years that you will get a reasonable rate of return. With the balance of equity and fixed income, when things go poorly in the equity portion of the portfolio, the fixed income will help to stabilize.

I wish you all a wonderful 2014. I thank you for having been with me over the last year – and for some of you many years – and I hope we can continue work to work together to make your financial future as bright as we possibly can.
To your success,

Danger: Stock market predictions ahead

As another calendar year gets under way, the country’s airwaves, websites, TV screens and mailboxes are filled with prognostications about what we can expect for stocks in 2014. More



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