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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.
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