After all the holiday spending, I know you’re now in the saving and investing mood. Now before you start putting your money to the next IPO or condo unit, consider some of these investment resolutions to avoid costly mistakes and make the most of your hard-earned money.
Resolution #1: I will have an investment game plan.
Figure out what your investment objectives are – your why – because that will dictate where, when, and how you will invest. If you don’t know how to do this, consult a Registered Financial Planner (RFP®).
Resolution #2: I will look beyond returns.
Returns are just one factor in making investment decisions. Sure, a track record of consistent good returns is a good indicator. But look also at other factors like cost, risk, and reputation.
Resolution #3: I will have conviction in my investment plan.
Are you a value investor or growth investor? Are you a short-term trader or buy-and-hold investor? Whatever investment philosophy, style, or approach you believe fits you best, stick to it and give it a chance to work.
Resolution #4: I will not follow the herd.
The problem with many of us is we just follow other people blindly on Facebook groups, online forums, or even faith-based communities. It’s okay to check out what others are saying but do your own research and stick to your guns.
Resolution #5: I will not assume I know everything.
No one knows everything. Even the most successful investors continue to learn. So read books, magazines (like MoneySense), and attend conferences and seminars (like – shameless plug alert! – Learning Curve events).
Resolution #6: I will always buy at a discount.
Whether stocks or properties, you make money when you buy. So always compare the current price with the fair market value. Buy stocks when they are cheaper and real estate when they are pre-selling, if they are foreclosed, or if the existing owner is desperate to sell.
Resolution #7: I will always have an exit strategy.
We spend so much time analyzing when, how, and at what price to invest in a stock or property, but we often don’t spend as much time planning when, how, and at what price to get out.
Resolution #8: I will always manage my risk and losses.
Are you diversified in your investment portfolio? Do you cut your losses at a pre-determined price? You need to know how much risk you are willing to take. You also need to make sure you don’t lose big and lose all the time.
Resolution #9: I will have a backup plan.
What will you do if you still can’t get your condo unit rented out after several months? What will you do if your mutual fund drops by 30% in value? You should have figured out in advance what you plan to do.
Resolution #10: I will not put the rest of my financial life in danger.
This means that even before you invest, you should have your finances in order. Pay off consumer debt first. Build up an emergency fund. Get the necessary insurance. You should not tie up your money in investments at the expense of your other financial goals.
Resolution #10: I will make sure I can afford to invest.
No, investing is not for everyone. If you can’t afford to pay the down payment and amortization, don’t buy a property. What if you can’t get a tenant for a year? If you’re depending on potential rental income to pay for your loan, you’ll be in trouble.
Resolution #11: I will make investing automatic.
Inertia and procrastination are obstacles to investing. Whether you’re too busy, too lazy, or took stuck with analysis paralysis, it’s better to make investing automatic. There are financial institutions that allow you to transfer a fixed amount every month to your chosen investment vehicle.
Resolution #12: I will not be overconfident.
When markets are booming, it’s easy to believe in your own investment genius. Don’t be too confident that you become too aggressive or take on too much risk.
Resolution #13: I will manage my emotions.
Face the fact that humans are irrational and emotional beings, especially when it comes to investing. So don’t fall in love with an investment that’s already losing you a lot of money. Don’t get carried away by the fear or greed of the crowd.
Resolution #14: I will invest more and more often.
Usually, we invest only when we have extra money to invest. Then we start asking around which investment gives the best return. What you should do instead is to invest consistently, even just small amounts, over time. If you have more money to invest, the size of your capital is more important than investment returns.
Resolution #15: I will not quote Warren Buffett unless I follow Warren Buffett.
We like to quote the most successful investor in the world but we still do short-term trading and market timing. If you like to quote Warren Buffett, invest like Warren Buffett.
Photo by Jungwoo Hong on Unsplash
