As a professional money manager, I get asked questions daily about where I think the market is headed in the near term. When asked on any day that ends in ‘y’, the answer is always the same: “I don’t know where the Dow will be tomorrow or next month or next year. I can tell you if equities are appropriate for your investment time horizon and if they are reasonably valued, but short term market predictions are for fools or charlatans”.

From time to time, I get asked to do the impossible. Recently a client said they decided, given all the market volatility, that he now wanted ‘steady growth’. This is an oxymoron. When owning stocks, you need to be prepared for unsteady growth. Some years (let alone months or weeks) will be up a lot, some down a lot, some – like 2011 is shaping up to be – will end up basically flat. Yet along the way – again witness 2011 – there will invariably be a lot of volatility. So set your expectations and emotional resiliency accordingly. Otherwise, you will end up doing as many market participants do - take action (sell) at just the wrong time (when the markets are down) since you won’t be able to take it any more (panic).

If you want steady, you should expect stable lack of growth. Cash, short term bonds, and the like offer plenty of steady. Steady losses over time that is – after taxes and inflation. Even committing your hard earned money to a 10 year time horizon with so called ‘safe’ treasury bonds will get you a whopping 2% before taxes and inflation. And if interest rates rise and you sell your bonds before maturing, you could be looking at capital losses as well (bond prices drop as interest rates rise). Cash is only king of the near-term; It is but a pauper over the long run given the low interest rate environment we find ourselves in.

As you set an investment plan for 2012, look back at 2011 (or for that matter 2010, 2009, 2008 or just about any other year) and recognize that when it comes to stock ownership, there really is no such thing as steady growth. Growth over long periods of time? For sure. Unless your money manager is named “Madoff”, consistent annual returns of 8% -10% simply don’t exist. But they don’t need to for you to accomplish your goals. Just align your investment time horizon correctly with your asset class ownership and the rest will take care of itself. Don’t need the money for 10 years? Then own a well-diversified portfolio of stocks and don’t worry about the inevitable ups and downs along the way.

Here’s to a great 2012!

(The information in this article is strictly for educational and illustrative purposes and is not an attempt to furnish personalized investment advice or services.)