With so many economic hobgoblins to frighten them, many investors found it easy to dismiss more positive developments as unsustainable or irrelevant. Below is a sampling of the 2013 financial headlines:

What can investors learn from this year's market behavior?

Most of us accept the idea that predicting the future is difficult, and predicting how other investors will respond to unpredictable events is even harder still. But, for some investment advisors and their clients, the temptation to engage in such efforts is irresistible. If only we could do so, we could be superheroes to our clients. We could have the satisfaction of outwitting other clever market participants. We would be so attractive to prospective clients that there would be a line standing at our door. However, the results from this past year teach us that we should be skeptical of anyone's ability to do this well enough to outperform our "simple but not easy" investment discipline. So, we resist the temptation to predict.

 However, we can guarantee the 2014 headlines will be just as frightening as 2013 so stick with our "simple but not easy" investment discipline, namely: focus on what you can control, globally diversify your money, own multiple asset classes, measure you goals and risk tolerance, buy, hold, and rebalance your asset allocation. When investors are studying the long-run record of US stock market returns several years from now, we suspect many of them will find it difficult to recall exactly what it was that they were so worried about that discouraged them from pursuing the capital market rewards that were there for the taking. That won't be the case for Denver Money Manager clients.

What are we telling clients to do right now?

Resist the temptation to abandon your allocation to bonds, real estate, emerging market stocks, or international developed stocks in favor of chasing the returns in the U.S. stock market. Rising interest rates is good news not bad news for investors because it means the economy is recovering and savers can expect more interest income. In the short term, bonds play an important role in stabilizing the volatility of your portfolio. Do not sell you bond investments but keep the bond maturities under 5 years. Given the stock market returns of the last 5 years, a priority for 2014 is to re-measure client's tolerance for risk in relationship to their current allocation and financial goals. Happy New Year!