MarksJarvis: Lessons learned from the stock market in 2013

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Rather, the U.S. was the part of the world that investors most trusted as it seemed ahead of the rest of the world in recovering from the strains of the 2008-09 financial crisis.

Europe surprised investors by moving out of recession, and the average European stock fund gained 26 percent. Likewise, Japan is making headway with reforms, and the average fund invested in stocks there gained 26 percent. Still, neither was a match for the 33 percent gain averaged by U.S. stock funds tracked by Lipper.

While developed markets produced sizable gains, emerging markets fell far short of the narrative that has been popular the last few years. The developing areas of Latin America and Asia remain highly dependent on customers and investment from the U.S. and Europe. And as the Federal Reserve hinted that it was going to start cutting back on stimulus, investors shunned emerging markets.

While analysts see potential in European and Japanese stocks for 2014, they question whether investors will favor emerging markets while the Fed continues to pull away stimulus.

Dividends matter, but sometimes they don't. Investors started the year focused on conservative stock investments with good dividends for income, but by spring they soured on sectors such as utilities, real estate investment trusts and telecommunications. Utilities, for example, fell about 13 percent, although as a group they ended the year up about 8 percent.

The disenchantment with the dividend-paying sectors is common at times when investors are expecting interest rates on bonds to rise. Cautious investors eventually turn to safe government bonds, instead of dividend-paying stocks for income. Investors, aware of the coming trend, shifted money early in mid-2013.

Diversification and buy-and-hold still work. While 2013 taught investors that they could buy virtually any type of U.S. stock fund and easily pocket great gains, 2008 taught the value of having bonds as shock absorbers in downturns. So analysts are warning investors in 2014 to keep their mixtures of stocks and bonds.

A review of 2008 shows why: In 2008, the stock market lost 37 percent. But people who had half their money in the stock market and half in long-term U.S. government bonds lost just 9.7 percent.

Twitter @gailmarksjarvis

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