10 rules for investing in the new year

by Badgley Phelps | Jan 17, 2019

It’s been a bumpy road lately for U.S. and global markets, which is why it’s more important than ever to remember the rules of investing. Here are ten tips from our financial planning and research teams for you to consider in the new year.

Rule 1: Think long term and have a plan.

Create a financial plan that takes investments into account. Invest as early as possible and as much as you can—but only with surplus funds—and match the investment risk to the timeframe in your life. Investing in your 20s and 30s looks very different than investing in retirement.

Rule 2: Don’t try to time the market.

Deviating from your long-term plan in an attempt to time the market can be costly. It’s best to set a course and stick with it rather than shifting strategies based on emotions or sentiment.

Rule 3: Do your homework.

Research stocks and bonds before investing in them, so that you fully understand what you’re buying and the inherent risks. Don’t invest in things that you fail to understand or that go against your ideals.

Rule 4: Don’t worry about keeping up with the Joneses.

Your investment portfolio should be customized to your unique situation and stage in life—not influenced by what’s popular in the community.

Rule 5: Diversify within each asset class.

Adding balance to your nest egg by investing in different types of assets can provide potential for growth while managing volatility and protection against market downturns.

Rule 6: Minimize fees.

Fees and other costs may reduce your portfolio’s return and should be considered when making decisions regarding your investments and the types of accounts that hold them.

Rule 7: Don’t forget about bonds.

While stocks generally perform better than bonds in the long run, high quality bonds provide predictable cash flows and often rise in value when the economy performs poorly. They provide a conservative element within the portfolio, which can lead to increased financial security.

Rule 8: Keep an eye on taxes.

Many investors underestimate the impact of taxes on their portfolio’s performance. According to Morningstar, the average equity mutual fund return is reduced by up to 1.2 percent per year due to taxes. By reducing this annual “tax drag,” you can increase your after-tax rate of return.

Rule 9: Keep emotions and expectations in check.

Try to avoid getting upset when the market fluctuates. It’s the nature of the market. Remember that investing should be thought of as a marathon, not a sprint.

Rule 10: Get and stay involved.

Take a disciplined approach, working closely with your trusted adviser—one who is also a fiduciary—and be an active participant in your investments. Monitor investments rigorously because, after all, it’s your money.

Our research and planning professionals are here to help, please let us know if there is anything we can do for you.



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