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Most investors would likely agree that 2014 has been an unusual year for stock market activity. A lot of investors got whipsawed and plenty of mistakes were made. There was a ton of confusion and, more recently, panic. It seems, at least to us sitting independently on the sidelines, that a lot of Canadian investors simply forgot the basics. With that in mind, here are five simple investment rules to follow in 2015.

Expect the unexpected:
Investors were likely most shocked by the fact that interest rates went down this year and that the energy sector got decimated. Eighteen months ago, everybody, including us, predicted that interest rates were destined to rise. Market predictions, of course, have a way of making everyone look bad. Interest rates fell, inflation was nowhere to be found, and 2% interest suddenly started to look good to investors. Similarly, if we told you that large oil companies such as Baytex Energy Corp. would fall 56% or more in the space of three months, you might have called us crazy. But energy stocks did plummet, crashing through all the most bearish scenarios of a year ago.

The lesson: When you expect the market to do something, you bear the risk of setting up your portfolio in the exact wrong way.
Markets do not always do what is expected, or, at the very least, valuations already reflect what is expected. Thus, even when you are right, you still might not make any money.

The rule for 2015: Do not predict or expect anything. Simply own a diversified portfolio of good stocks or exchange-traded funds in every market sector.

Don’t sell because it is down:
Many investors have recently thrown in the towel on the energy sector, just like they did on the gold sector earlier this year. Selling because you are losing money is the wrong reason to sell. Sure, getting rid of your losing investments is often the right thing to do because of weakening company fundamentals, but not because of a weak share price. Case in point, Glentel Inc. Many investors gave up on the company because its shares had not done too much, and they were bored. Glentel’s last quarter showed some improvement, though, and BCE Inc. considered it good enough to take over, at more than a 100% premium. We imagine there will be plenty of takeovers in the oil sector next year, because investors are too indiscriminately selling.

The rule for 2015: Sell for fundamental reasons, not because of share prices.

Stay calm:
This tip might seem obvious, but in the volatility of September and October and more recently in the energy sector, investors went into full-on panic mode.
A company's fortunes do not change overnight and a 25% drop in a company’s shares does not mean its earnings will drop 25%. In pipelines, for example, shares of companies such as Pembina Pipelines Corp. have dropped 30% or more in 60 days or so. Has the pipeline business changed that much? Are dividends that less secure? Probably not.

The rule for 2015: Don’t panic. Stocks can go down sometimes, which is why there is an equity premium.

Stay away from mutual funds:
Do we really have to mention this? Everyone should know that practically no mutual fund can beat the market over the long term. Everyone knows fees are too high. Everyone knows that mutual funds are ‘sold’ and not bought, and that advisors get paid to recommend them. Yet the mutual-fund industry still grows every year.

The 2015 rule: Do yourself a favour and don’t buy mutual funds.

Don’t gamble:
Every day, it seems, we get questions about some small-cap resource stock, or some double-up or double-down ETF that happens to be moving. We see investors go to 100% sector positions, or 50% sector positions (usually the banks), because they always pay off. You can do this if you want, but please recognize it for what it is: gambling, not investing. You are simply taking a bet when you buy a leveraged product or load up on a single company or sector. Like any bet, you will end up either very happy or very sad. Investing, though, is a process and a diversification decision.

The rule for 2015: Invest, don’t gamble.

Here's hoping everyone will be better able to handle what the market throws at us in the next 12 months.