New Year's Investing Resolutions
Each New Year brings the opportunity for a fresh start. Among the traditional New Year's resolutions are to lose weight, get in shape and quit smoking. The following are my suggestions for resolutions for investors.
- If you don't have a financial plan, the very first thing you should do is write one and sign it.
- Make sure your investment plan doesn't take more risk than you have the ability, willingness or need to take.
- Make managing the portfolio a year-round job, checking for rebalancing and tax-loss harvesting opportunities on at least a quarterly basis.
- If you're working with an advisor who doesn't provide a fiduciary standard of care, fire him/her and hire one that does.
- Separate the services of financial advisor, money managers, custodian and trustee.
- Don't invest in any security unless you fully understand all the risks.
- Avoid all actively managed funds and repeat to yourself "past performance is not a predictor of future performance."
- Don't stretch for yield. The main role of the fixed income portion of the portfolio is to reduce portfolio risk to an acceptable level.
- Ignore all "expert" forecasts, recognizing that they have no value.
- Don't buy any individual stocks, sector funds or country funds, as that has more to do with speculating than investing.
- Keep a diary of your predictions and review them every year.
- Adhere to your plan, regardless of what the market does.
- If you watch CNBC, make sure the mute button is on.