Retirement Investor

Six New Year’s Investment Resolutions


New Year’s resolutions are an annual ritual for many, with health-related resolutions such as eating healthier foods, adopting a regular exercise regimen, and getting more sleep among the most common resolutions. In the spirit of the season, investors should consider making (and sticking to) resolutions to lead a healthier investment life. The following resolutions are suggestions that may reduce stress and improve investment performance: 

Go on a media diet

The “activity bias” is a common behavioral pattern among investors who closely follow the day-to-day (or minute-to-minute) activity in the markets. There is a healthy balance to be found between being well-informed and being overly stimulated by what can be a continuous flow of information. Investors who struggle to find that balance often trade more frequently than is advisable, leading to adverse performance and tax consequences. Consuming less business and political news may be a healthy resolution for those who find themselves binging on the latest tweets, broadcasts, and articles.

Think about constraints when assessing the intersection of politics and the markets

The Google search term “tax implications of Build Back Better” generates nearly 5 billion results. Many of the tax proposals floated in the design and included in multiple drafts of the Build Back Better legislation had little or no chance of passage given the likely opposition from Senators whose support is critical for passage, such as Joe Manchin and Kyrsten Sinema. Investors who understand political constraints and the implications for policy initiatives are more likely to successfully tune out the noise implicit in topics that generate billions of search results.

Spend less time in “echo chambers”

Confirmation bias is the tendency to seek evidence that supports preexisting beliefs, and to interpret information in a way that supports an existing position. The echo chamber that comes from avoiding contrary viewpoints can lead to costly investment mistakes. Seeking contrary points of view is a necessary step in testing an investment point of view, and an important (and perhaps uncomfortable) resolution for 2022.

Take an objective look at your portfolio

The New Year is a logical time to evaluate your current investment holdings. Some recent winners may have benefited from a favorable market environment and may not be able to sustain their success. If recent success isn’t sustainable, it may be time to look for opportunities to upgrade the holding to an investment with superior prospects. The same analysis should be applied to less successful positions. Evaluating whether losing positions are likely to recover is a critical aspect of portfolio management. Oftentimes, recent laggards are tomorrow’s leaders. But some investments that seem cheap today can get a lot cheaper! In an environment in which technology-enabled disruption is ubiquitous, it is important to be vigilant about winning and losing investment holdings. 

Ask the right question(s)

Investment discussions in January are dominated by forecasts for the coming year. The most common question is: “What do you expect the market to do this year?” Although the natural impulse is to focus on the one-year outlook, for most investors the focus on a relatively short-term time horizon is counterproductive. Investors should start the year with a budget and investment allocation that takes into consideration known cash needs and an emergency reserve for unexpected cash needs. Beyond those near-term cash needs, the remainder of the portfolio should be invested in alignment with long-term financial and personal goals. The right questions to ask are to integrate investments with financial planning objectives, focusing on long-term objectives while being aware of near-term considerations beyond whether markets will go up, down, or sideways. Realistically, once cash needs are taken care of, most investors have time horizons measured in years if not decades. The unreliable directional “crystal ball” for one-year periods becomes a lot more reliable over longer periods, making planning a more predictable and less stressful exercise. Consequently, perhaps the most important resolution is to think with the long-term in mind and worry less about day-to-day volatility.

Read a book. The final suggested resolution to start the year is: read a book! There are several books that provide sound advice about how to be a more self-aware and effective investor. Daniel Kahneman was awarded a Nobel Prize in 2002 for findings that challenged assumptions of human rationality prevailing in modern economic theory. Kahneman’s Thinking, Fast and Slow summarizes decades of research and explains patterns of thinking that influence decision-making. Investor and Columbia Business School adjunct professor Michael Mauboussin has done considerable work on behavioral finance and on assessment of success and failure in investing. Mauboussin’s The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing provides insight into the role that both skill and luck may play in investment success and how to better distinguish between the two. A third book is about private equity, which has been among the best performing segments of the market for many years. For a primer on what can go wrong in private equity, Bryan Burrough and John Helyar’s Barbarians at the Gate is an entertaining but cautionary chronicle of a deal gone wrong in a spectacular manner.

Staying on track with resolutions is easier said than done. The likelihood of staying on track is higher for people who make themselves accountable for their resolutions. Sharing resolutions with colleagues or friends is one way to keep on track. The risk of embarrassment can be a powerful motivator! It helps to put resolutions in writing and keep them in a visible place as a constant reminder. Establishing some sort of reward system can also be helpful — meaningful accountability for success or failure can provide the incentive to stick with difficult behavioral changes. Making and sticking to New Year’s resolutions may not guarantee investment success but is likely to increase the likelihood of long-term success.



Registration with the SEC should not be construed as an endorsement or an indicator of investment skill, acumen or experience. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal. Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable

Daniel Kern, CFA, CFP

Daniel S. Kern is Chief Investment Officer of TFC Financial Management. He is responsible for overseeing TFC’s investment process, research activities and portfolio strategy.

Earlier in his career, Dan was head of asset allocation at Charles Schwab Investment Management and managed global and international equity portfolios for Montgomery Asset Management.

He is a Board member and Chair of the Investment Committee for the Cambridge Community Foundation, on the Board of Advisors for the Brandeis International Business School, an Independent Trustee for Green Century Funds, and on the Board of Directors of Wealthramp.

Dan is a graduate of Brandeis University with a Bachelor of Arts in Economics degree. He also holds a Master of Business Administration degree from the University of California, Berkeley – Haas School of Business.

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