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8 New Year’s Resolutions for Investors

Keeping it simple is half the battle


spinner image a sign that says 2024 financial planning
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Even though it was far better for investors than 2022, 2023 has been another turbulent year for stocks and bonds. U.S. stocks have nearly recovered what was lost last year, while bonds are turning in a small positive return. As we get ready to welcome a new year, it’s the perfect time to make these eight resolutions for 2024 and beyond.

1. I will stop making Wall Street rich.

High fees are the single best predictor of lower returns. Today, more than half of the assets in U.S. stocks are in index funds, some of which have fees as low as zero percent to .03 percent per year. There are also low-cost international stock funds as well as bond funds. You worked hard to build up your nest egg, and no one has a right to get rich from your portfolio.

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2. I will own everything.

Typically, about 4 percent of stocks account for virtually the entire return of the stock market. This year has been more lopsided than usual, as 0.2 percent of stocks, known as the magnificent seven (Alphabet, Apple, Amazon, Meta, Microsoft, NVIDIA and Tesla), have driven the vast majority of the market return. Because the star stocks usually flame out eventually, the best way to own the stars next year and beyond is to own every one though a total stock index fund. 

3. I will ignore the experts.

Don’t invest based on any advice from experts, whether from the sensational media headlines, talking heads on TV or sophisticated economists. Understand and accept that no one knows the future of markets. Investing based on the experts is merely following the herd, which typically doesn’t end well.

4. I don’t know anything the market doesn’t already know.

We know there are wars in the Mideast and Ukraine. We know bonds have done poorly over the past three years. In fact, though I think I know a lot about investing, I’ve never known anything that the rest of the world didn’t know. So don’t invest based on any knowledge already priced into the market.

5. I will embrace uncertainty.

Investing involves risk, and so-called foolproof investments are for fools. Before making any investment, list at least three things that could go wrong and discuss them with someone you trust. Then ask yourself if you are willing to take these risks and how material a bad outcome would be in terms of losses and the impact of those losses on your lifestyle.

6. I will buy low and sell high.

The only thing predictable about the stock market is that investors will get greedy and buy high after a surge and become fearful and freak out and sell after a plunge. Listen to Warren Buffett when he says “be fearful when others are greedy, and be greedy when others are fearful.” Set your asset allocation between stock and bond funds and stick with it. When stocks tank (and they will), buy more to get back to that allocation. When stocks surge, sell to get back to your target. Doing so requires you to ignore your own instincts, which typically fail us when it comes to investing.

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7. I will use common sense.

Common sense isn’t all that common when it comes to investing. Understand that strangers don’t really call to make others rich. If someone really knew how to beat the market, they would be billionaires rather than trying to sell a market newsletter subscription for up to $200 a year. We may want to earn all of the upside of the market without risk but we can’t. If someone is trying to get you to buy something, make sure you understand how they and others are making money and why it would still be good for you.

8. I will keep investing simple.

It’s so easy to own over 10,000 stocks across the globe and all U.S. investment-grade taxable bonds by buying three low-cost index funds: a total U.S. stock index fund, a total international stock index fund and a total bond fund. And simple investing works. I’ve seen very few portfolios outperform simplicity. In addition to being superior to complexity, it’s far more tax-efficient than using funds that pass-through gains you pay taxes on. Fight clutter and simplify.

Conclusion

No one cares about your money more than you do. These eight resolutions are timeless and will help you protect your wealth that you have earned and support your financial independence in retirement.

You may want to print this out and put it in a place where you can see it daily or at least have it handy enough to pull out the next time markets plunge or you get that urge to do something you haven’t had time to think about and discuss with others. You may even want to sign this page as your own personal commitment that you will follow these resolutions in 2024 and beyond.

Here’s wishing you a healthy and wealthy new year.

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