As we approach a new year and a new decade, now is a perfect time to think about the Top 3 resolutions for investors in 2020.
Around this time every year, millions of people take that long stare into nothingness to ponder one thing:
What am I going to do differently next year?
Of course, common thoughts are saving money, losing weight, getting a better job, finishing school and so on.
But for investors, there is a whole different mindset. Thoughts of that next big company to invest in or the best new strategy prevail.
Top 3 Resolutions For Investors in 2020
No. 1: Take More Control
The market can be a scary thing with o many choices of what to invest in and so little guarantee that it will work out.
Those are the main reasons why many decide to leave their investing to professionals — like money managers. You let them grow your wealth by investing in things like mutual funds.
But one thing to consider is the S&P Dow Jones Indices SPIVA U.S. Scorecard — which measures the performance of fund managers compared to a close benchmark index. It looks beyond just the S&P 500.
Here are some numbers to noodle on for a bit:
- 5% of large-cap funds underperformed the S&P 500 over five years.
- 7% of those funds underperformed the S&P 500 over three years.
- 70% of large-cap funds underperformed the S&P 500 in one year.
So basically, you are just throwing your money away by handing it to a fund manager to invest.
The solution: Take more control of your investing.
Open an investing account and you’re off and running. It’s a little more complicated than that, but opening an investment account is where you’ll start.
It’s important to recognize you will win some and you will lose some, but you will do it on your own.
With platforms now offering $0 fees and commissions, there is really no reason why you shouldn’t take more control of your investing future.
That is a big reason why taking control is one of our Top 3 resolutions for investors in 2020.
No. 2: Invest In What Interests You
Far too often, investors look at what they think is sexy or what they believe is the next big breakout. And more often than not, they are wrong.
If you are going to invest, you need to understand what your reasons are for investing in a particular company or fund.
That’s why one of our Top 3 resolutions for investors in 2020 is to invest in what interests you.
If you’re interested in something, you are going to do research and learn more about a particular sector or company. You’ll look at things like the fundamentals, price-to-earnings ratio and management of a company if you are interested in it.
The more educated you are, the better decisions on your investments you can make.
But you also have to be willing to take a step back from a position if that research finds it is not the best investment for you. So there is a degree of strong discipline required.
Starting with something you are interested in means you’ll do your homework and make the best decision you can on whether to invest your money in a sector or company.
That makes investing in what interests you one of our Top 3 resolutions for investors in 2020.
No. 3: Get a Little Defensive
Anyone who has watched the markets — let alone invested in them — knows volatility is ever-present.
It may take time to rear its ugly head, but it will show up, and markets will pay the price.
In 2019, we saw politics, a trade war and interest rate cuts wreak havoc on the market. There is little to suggest similar outside forces won’t cause a repeat performance in 2020.
As an investor, it’s vital to understand fluctuations come and go and you should be prepared for them when they happen again … and they will happen again.
It doesn’t mean you sell off all your biotech stock and invest it all in dividend funds (but if you’re looking for dividend funds in 2020, check this out). It does mean being a bit defensive in your overall investment strategy.
Brian Nick, the chief investment strategist for global investment management firm Nuveen, told Kiplinger sectors like health care and consumer stocks are good defensive strategy positions. He said health care stocks are “high growers, but also somewhat defensive,” and that “consumer still looks pretty strong, with high savings rates.”
Things might be good now and they might stay that way for a while but it’s almost inevitable that volatility will show up at some point.
Because of that, getting a little defensive is one of our Top 3 resolutions for investors in 2020.
There you have it.
As we come into a new year and new decade, we will face unique challenges in the market. It’s essential to prepare and arm yourself with as much information as you possibly can.
Our Top 3 resolutions for investors in 2020 center on one common theme: Taking control of your money and investments. Don’t just hope for the best by handing your money over to someone else. It’s your money, you earned it and you should have complete control over what it does for you.
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