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Expectations

The Christmas Holiday has come to mean many things to individuals, but the one word that sticks out to me is expectations. Whether a child or adult we come to develop expectations with the holiday. Some are fulfilled and others become a memory or hope for the future. This being Christmas Eve eve, I have expectations built in my mind of having time off, getting to relax and spending time with family and friends. It will be perfect and everything will go according to plan, right? Only time will tell, but if it does or doesn’t, the reality of the events versus the expectations will never be equal.

Recently I watched the move “Inception”, my expectations were low as the description and previews of the movie didn’t give me high hopes. However, after the movie ended, I was impressed with the entire movie. In other words it exceeded my expectations. That experience explains life in general. It also explains the process of managing money. As this year began I never expected the year to unfold the way it did, which meant making adjustments to the disappointments and being willing to hold on to the positions that outperformed the highest expectation.

Who would have believed silver would have outperformed gold 3 to 1? The reality of Bank of America falling from $19.50 in May to under $11 in November? The best of plans don’t always work out as we plan. Thus, as the year winds down and I take the time to reflect on my year of investing, the word expectation defines what I learned and how to apply it in the coming years and improve the investing process. There were positions taken where my expectations were far exceeded relative to results and there were positions where my expected results weren’t even close, in fact, they define the word disappointment.

There is a common thread running through the results relative to the expectation in each case – emotions. If the markets were in an uptrend the expectations were higher. When the markets were sideways or down the expectations were lower. The influence of emotions were derived from the results of the market prior to my investing. Thus, this set me off in a direction of understanding if this was or is a good thing relative to the decision making process. The obvious answer to the question is it is bad, right? Bad is probably too strong of a word, but the emotions do skew the thinking process and thus the decisions are influenced, having an effect on the end results. This has me on the mission for 2011 to tweak my expectations based on the strategy implemented and less on the current market cycle or trend. I’ll let you know how it works.

The new year brings with it new expectations and hope. They are all based on what we know now and what we believe will happen looking forward. Some will exceed our wildest dreams and others will be extemely disappointing as they fall short of the expectations. The key is to learn from the process, but never stop believing that Santa will bring exactly what we expect.

My wish is you get exactly what you expect for the holidays and in the new year! Remember all of those who are in the military and unable to fulfill their expectations of being home for the holidays. They deserve our support and prayers they can all be home soon!

Happy Holidays!



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.