2024 provided us with another year of unpredictable changes. While not exhaustive, here are a few:

  • The continued war in Ukraine.
  • Hamas’s invasion of Israel, and Israel’s response throughout the region.
  • The sudden and total collapse of the 50-year regime in Syria.
  • A sitting U.S. president terminated his reelection campaign about 100 days before the election.
  • The reelection to the presidency of a person awaiting sentencing in a felony case.
  • The stock of the leading U.S. chip manufacturer more than doubled (Nvidia).
  • The S&P 500 Index posted a gain of more than 20% for the second year in a row, the first time that has happened since 1998-1999. Schwab: It Was a Very Good Year
  • As was widely anticipated, the Fed cut interest rates by a quarter of a point in December and the S&P 500 Index went down almost three percent that same day.

What this illustrates is that substantial change is the norm, not the exception, and the economy, markets, and geopolitics are unpredictable.

This is an important reality to grasp as you reaffirm your investing goals and guiding philosophy in the new year. As long-term goal-focused investors, avoid these looming traps on the horizon:

3 Traps to Avoid

  1. “This Time It’s Different”: These are the four most dangerous words in investing, according to Sir John Templeton, a renowned investor www.goodreads.com/quotes.

    This first investor trap to avoid is believing that what we’re experiencing right now is completely new, which necessitates discarding previous and long-standing evidence, lessons, and principles.

    Current examples include Donald Trump’s return to the White House, the emergence and impact of artificial intelligence, and global conflicts. 

    These examples may be unique from a news standpoint, but from an investing standpoint, they are far from new and different. Financial markets have historically demonstrated that they are primarily focused on one data point above all others: the impact on future earnings. 

    What impact will this new piece of information have on the future earnings of X company? 

    Take COVID-19, for example. When the deadly virus made headlines each day, it was certainly unique from a health and lifestyle standpoint. However, from an investing standpoint, it was no different from any other news. 

    In the early stages, there was massive uncertainty about the impact of COVID-19 on each company’s future earnings, so stock prices were driven down sharply. As more information became available and the prospects for a vaccine looked better, stock prices went back up. 

    Those who bought into the “this time it’s different” narrative and sold when stock prices fell likely missed the sharp recovery, which would have been detrimental to their financial futures. 

    The lesson is to avoid believing the news reporting that “this time it’s different” and allowing it to impact your investing philosophy and discipline. 
  2. Performance Chasing: Berkshire Hathaway’s Warren Buffett once said, “The investor of today does not profit from yesterday’s growth.”  Warren Buffett Quotes

    In that valuable quote, Buffett was referring to trap #2. At the beginning of each year, many well-intentioned investors look for the investment or asset class that performed best in the prior year and use that as a signal to sell what didn’t perform as well and buy what performed better. 

    That’s called performance chasing, and it’s a potentially dangerous investing strategy.  

    One example of this might be someone choosing to buy Nvidia shares just because it was a top-performing stock last year.

    Another example is the S&P 500 Index, which just finished two consecutive years with gains above 20%. It’s not hard to see why it would be tempting for investors to buy more shares of an S&P 500 Index fund (which invests in the largest U.S.-based companies) in favor of a more diversified approach.  However, as obvious and simplistic as this may sound, it’s critically important for investors to realize they receive none of that previous growth that caught their attention. The day they buy the stock, their return is zero. 

    Also, that stock is different than what it was just a year or two ago. For one, the price is more expensive in relation to the earnings of the companies in the index, which can have a significant impact on the expected future return.  wsjmarket-data/stocks/peyields

    Second, the composition of the S&P 500 Index is far more concentrated today, i.e. the “Magnificent Seven” stocks comprise a much higher percentage of the index than in the past.  how-the-top-sp-500-companies-have-changed-over-time

    These two factors point to an increased risk of subjecting a greater percentage of your retirement portfolio to an S&P 500 Index fund than two years ago. 

    The other point is that after rising sharply in the late 1990s during the dot.com bubble, the S&P 500 Index fell 9.1% over the 10-year period from 2000 to 2009.  S&P 500 Index Returns in 2000s

    This is not to say that the S&P 500 Index shouldn’t be part of your broadly diversified investment mix. It’s simply highlighting the range of possible outcomes so you can make educated decisions regarding your investment allocation and remain disciplined vs. the increased risks that can come with performance chasing.  
  3. Forecasting: As is typically the case, the number of prognosticators who accurately forecasted stock market performance in 2024 was painfully small. 

    As you likely noticed at the beginning of 2025, this has not stopped them from making more forecasts and predictions!

    We recommend steering clear of trap #3, which is paying attention to anyone who makes a short-term stock market forecast (e.g., one year)… no matter who they are! While they may come across as soothing, fascinating, discouraging, or optimistic, their forecasts are of no value in formulating a successful long-term investment policy and strategy.

    While markets are a vital tool, successful investors are relentlessly goal-focused, as opposed to the unsuccessful who are anxiously market-focused

    There is a huge difference.  

Here’s to a great 2025 for you!

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your account holdings correspond directly to any comparative indices or categories. Please also note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your accounts; and, (3) a description of each comparative benchmark/index is available upon request

Author Jack Phelps Managing Partner / Financial Advisor

Jack has been involved in the financial services industry since 1989. He is the author of "The Relaxing Retirement Formula: For the Confidence to Liberate What You’ve Saved and Start Living the Life You’ve Earned."

About Savant Wealth Management

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Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments and/or investment strategies recommended and/or undertaken by Savant, or any non-investment related services, will be profitable, equal any historical performance levels, be suitable for your portfolio or individual situation, or prove successful. Please see our Important Disclosures.