Happy New Year guys! It has been a tough 2022 for most investors but we made it through.
As we start the New Year, it’s the perfect time to reflect on the year that’s just passed, and to think about our 2023 New Year’s resolutions, including our investment goals.
In the spirit of the season, these are seven New Year’s resolutions that smart investors should consider making (and sticking to).
1. Review your financial plan
With rising inflation, it is difficult for some of us to manage our budget as we get caught up in trying to cover day-to-day expenses.
If you fall into this category, it’s time to review your budget and financial plans to make sure that you are on track to meet your financial goals.
One of the practical steps is to look at your year-end statements provided by banks (for things such as credit cards) to see where your money is going.
This helps you to identify areas of overspending. It also helps you to ensure that you have a budget in place for investing.
2. Start investing
The current economic environment might not be the most ideal time to invest but investors should start investing with a focus on the long term.
The important thing is simply to get started as your money will grow faster with compounding interest even if the current market downtrend persists in the near term.
One of the easiest ways to get started is to dollar cost average (DCA) when making investments.
3. Say “NO” to FOMO and FUD
The volatile market over the last year teaches us one thing. That’s that we should say “NO” to FOMO and FUD.
Whether it is the “fear of missing out” or “fear, uncertainty and doubt”, investors need to look beyond their emotions when investing.
Not every investment is right for you.
This is why you need the next resolution to keep you rational.
4. Create a long-term investment plan
This is probably the most important one that investors need to get onboard with.
The most successful way to invest for a strong financial future is to create a saving and investing plan for the long term.
You can do this by taking into account your long-term financial goals, risk tolerance and investing time horizon.
This helps you to set the right asset allocation into a diverse portfolio of assets.
With this plan in place, it helps you to better prepare for the inevitable market dynamics.
5. Build your wealth with dividends
One simple investing strategy is to focus on dividend-paying stocks.
Regardless of the market condition, dividends are a cash return on your investment.
You can use your dividends to cover your expenses or to reinvest them by buying stocks at better valuations when stock prices drop.
Personally, I reinvest dividends into the stock market to accumulate and build my portfolio.
REITs are one of the asset classes that continue to pay distributions to shareholders, despite the negative market conditions.
While dividend returns could lower in the near term, long-term investors can take advantage of the market weakness to build their wealth through dividend investing.
6. Avoid confirmation bias when investing
Confirmation bias is common among investors and traders as they seek evidence to support pre-existing beliefs and to interpret new information to support existing positions.
I believe investors should learn to seek contrary points to their views in order to test their investment viewpoint.
Aside from that, investors need to find a healthier balance between being well-informed and being overly stimulated with headline news.
Just like confirmation bias, most media outlets report the same news with different formats, fashions, and wordings.
When you read the news repeatedly, it turns into something more severe, scary, and urgent than it really is.
7. Take an objective look at your portfolio
The New Year represents a fresh start for investors, but this doesn’t mean you should ignore your existing portfolio.
In fact, it is important to look at opportunities to readjust your investments based on your overall portfolio so that your risk is not tilted to the extremes.
If you have done well in 2022, it is important to ask the questions whether these past winners can continue to outperform.
However, if your portfolio has suffered losses, investors should see if there is an opportunity for a recovery in 2023.
Stay invested for the long haul
These seven New Year’s resolutions will put you on track to stay invested for the long term.
Instead of chasing the latest investment craze, a smart investor will take advantage of the market weakness to build their portfolio for the long term.
The New Year represents a good start for any investors. Take this opportunity to consider the state of your own finances, goals and get started now.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
