Financial Adviser: 5 Investing Resolutions for 2024 and How to Achieve Them

As we enter a new year, it's an opportune time to reflect on our financial goals and set resolutions to enhance our investment strategies.

Whether you're an experienced investor or just starting out, setting clear investment resolutions can provide a roadmap for success and help you stay focused on achieving your financial objectives.

Investing is a dynamic and ever-evolving field, influenced by various factors such as market trends, economic conditions, and individual risk tolerance.

By setting investing resolutions, you are taking a proactive approach to your financial future and committing to making positive changes in your investment approach. These resolutions can help you develop good financial habits, mitigate risks, and make progress towards your long-term financial goals.

Before diving into the five investing resolutions, it's important to emphasize the significance of having a well-defined investment strategy.

An investment strategy serves as a guiding principle, helping you make informed decisions and navigate the complexities of the financial markets. It takes into consideration factors such as your risk tolerance, time horizon, financial goals, and market conditions.

By aligning your investment resolutions with a sound strategy, you can increase the likelihood of achieving success in your investment journey.

Now, let's explore the five investing resolutions for 2024 and discuss actionable steps to accomplish them:

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1| Increase your savings by monitoring your expenses

Saving more and increasing your contributions is a crucial step towards building a solid foundation for any investor. By saving more, you are creating a pool of funds that can be invested to generate wealth over time.

Evaluate your current savings rate. Take a close look at your current savings rate. How much of your income are you setting aside for savings and investments? It's important to have a clear understanding of where your money is going and how much you can realistically save.

Identify opportunities to cut back on unnecessary expenses. Review your expenses and identify areas where you can cut back. This could include reducing discretionary spending on non-essential items, finding ways to save on monthly bills, or reevaluating your subscription services. By trimming unnecessary expenses, you can free up more money to put towards savings and investments.

One effective way to ensure consistent savings is to automate the process. Set up automatic transfers from your checking account to a dedicated savings or investment account. By doing this, you eliminate the temptation to spend the money and make saving a priority.

It's important to have specific savings goals in mind. Determine how much you want to increase your contributions by and set a timeline for achieving those goals. For example, you might aim to increase your contributions by 1% each month or 12% each year. Setting specific goals helps you stay focused and motivated.

Don't underestimate the impact of small increments in your contributions. Even a slight increase can have a significant impact on your long-term investment results, thanks to the power of compounding. Over time, these small increases can compound and grow into substantial savings.

2| Diversify your portfolio to minimize your risks

Diversification is a fundamental strategy in managing risk and optimizing returns in an investment portfolio. By spreading your investments across different asset classes and sectors, you can reduce the impact of any single investment on your overall portfolio performance.

Start by evaluating your current investment portfolio. Take a close look at the assets you hold and determine if you have a well-diversified mix of investments. Consider the asset classes you are exposed to, such as stocks, bonds, cash, and real estate, as well as the sectors within those asset classes.

Real estate, for example, has traditionally been recognized as a hedge against inflation, safeguarding an investment from losing its value amid a decline in purchasing power. However, historical market data indicates that property stocks, in general, tend to decline when inflation rises.

This trend is attributed to the fact that higher inflation often leads to higher interest rates. As interest rates increase, borrowing becomes more expensive, potentially reducing the demand for home loan financing and resulting in lower property sales.

The property index in the Philippine Stock Exchange has shown a negative correlation with the movements of the 10-year Philippine bond yield 63 percent of the time since the year 2000.

It's important to be exposed to a wide range of asset classes and sectors. This helps ensure that your portfolio is not overly concentrated in any one area. Evaluate whether you have a balanced allocation across stocks, bonds, and other asset classes.

Additionally, consider the sectors within each asset class, such as renewable energy, gaming, or consumer goods. Aim for a diversified mix that reduces your vulnerability to any specific industry or sector.

One key aspect of diversification is investing in assets that have low correlation with each other. This means that their performance does not move in lockstep. Look for investments that have historically shown little correlation with your existing holdings.

For example, if you primarily hold common stocks, consider adding preferred stocks or bonds to your portfolio. This can help reduce the risk of being too heavily influenced by the performance of a single market.

In addition to traditional asset classes, consider exploring alternative investments such as real estate, gold, ETFs, or even cryptocurrencies.  These can offer further diversification and potentially unique return drivers. However, keep in mind that alternative investments often come with their own set of risks and may require a higher level of expertise or access.

3| Educate yourself and stay informed through continuous education

Investing is a lifelong learning process. Resolution number three is to commit to educating yourself and staying informed about the ever-changing financial landscape.

The financial markets are dynamic and subject to constant change. By staying informed, you can adapt your investment strategies to align with current trends and take advantage of emerging opportunities.

By continuously learning, you can expand your knowledge base and gain a deeper understanding of different investment approaches. You can learn by reading books to gain valuable insights and learn from experienced authors their experiences and mistakes. Books are an excellent source of in-depth knowledge on investing.

Attending seminars or webinars offer opportunities to learn from industry professionals and experts. They often cover specific topics or investment strategies and provide a platform for interactive learning.

One program you can attend is the Registered Financial Planner (RFP) Program, which teaches basics of personal financial planning. Attending programs like this allows you to ask questions, engage in discussions, and network with other like-minded individuals.

Staying updated with financial news is essential for understanding market trends, economic indicators, and company-specific information. Reputable financial news sources such as Bloomberg, CNBC and Channel News Asia provide accurate and timely information, helping you make informed investment decisions and gain a broader perspective.

If you can find mentors who can provide valuable guidance and insights based on their extensive experience in investing, that will be a great help. A mentor who aligns with your investment style can accelerate your learning and development as an investor.

By engaging in ongoing education and learning, you can make more informed investment decisions and adapt to evolving market conditions. Remember that investing involves risks, and continuous education helps you manage those risks effectively.

4| Review your investment portfolio and rebalance regularly

Regularly reviewing and rebalancing your investment portfolio is a critical aspect of maintaining alignment with your financial goals and risk tolerance.

Setting a regular schedule to review your portfolio ensures that you consistently assess its performance and make necessary adjustments. At a minimum, it is recommended to review your portfolio once a year. However, you may also consider conducting reviews more frequently, especially during significant life events such as changing careers, getting married, or nearing retirement.

During the portfolio review, one of the primary considerations is to assess whether your investments are still in line with your desired asset allocation. Asset allocation refers to the distribution of your investments across different asset classes like stocks, bonds, real estate, and cash.

It is based on your financial goals, risk tolerance, and time horizon. Over time, market fluctuations can cause the asset allocation to deviate from your original intention. Regular reviews allow you to identify any imbalances and take corrective action.

Rebalancing involves adjusting your investment holdings to return them to their intended proportions within your asset allocation. When reviewing your portfolio, you may find that certain assets have performed well during good times and now represent a larger portion of your portfolio than desired. These are known as overperforming assets.

On the other hand, some assets may have underperformed, resulting in a smaller allocation than intended. By rebalancing, you sell a portion of the overperforming assets and use the proceeds to buy more of the underperforming assets.

This process helps maintain your desired asset allocation and ensures that your portfolio isn't overly concentrated in a particular area, which could expose you to unnecessary risk.

Regular portfolio rebalancing helps prevent your portfolio from becoming too heavily weighted in one area. Concentration risk occurs when a significant portion of your investments is allocated to a specific asset class, industry, or individual security.

By rebalancing, you intentionally sell some of the assets that have appreciated in value and allocate those funds to other areas of your portfolio. This approach helps diversify your investments and reduce concentration risk.

5| Stay disciplined and avoid emotional investing

Emotional investing can be detrimental to long-term investment success. Make it a resolution to stay disciplined and avoid making impulsive decisions based on short-term market fluctuations or emotions.

Emotional investing often leads to impulsive decisions driven by fear, greed, or panic. For example, during periods of market volatility, investors may be tempted to sell their investments out of fear of further losses or buy into a rapidly rising market due to the fear of missing out.

These impulsive decisions can result in buying high and selling low, which is contrary to the principle of buying low and selling high. By staying disciplined, you can resist these impulses and make rational decisions based on your long-term investment strategy.

Emotional investing often leads individuals to try timing the market, which can result in missed opportunities or significant losses. By sticking to your investment strategy and avoiding market timing, you can focus on your long-term goals and avoid the stress and uncertainty associated with short-term market fluctuations.

Investing is a long-term endeavor, and success is often measured over extended periods. Emotional investing tends to focus on short-term gains or losses, which can lead to a lack of perspective and hinder your ability to achieve long-term financial objectives.

By maintaining discipline and focusing on your investment strategy, you can stay committed to your long-term goals and navigate short-term market volatility with greater resilience.

Consistency is crucial for building wealth over time and benefiting from the power of compounding. By avoiding emotional reactions and staying disciplined, you can make consistent investment decisions aligned with your long-term strategy.

Henry Ong, RFP, is an entrepreneur, financial planning advocate and business advisor. Email Henry for business advice hong@financialadviser.ph or follow him on Twitter @henryong888