By Investment U
We’ve closed the book on 2013, and it’s time to make resolutions for the new year. Alexander Green’s “Four Resolutions That Will Make You Rich” is great advice for investors. Now, let me share with you my five resolutions.
Adjust the Signal-to-Noise Ratio. I read and study voraciously, and a lot of that is done on the Internet. There is a tremendous amount of information out there. But separating the signal (useful) from the noise (harmful) can be difficult.
I want to adjust that ratio so my useful signals are stronger and I absorb less noise.
This means tuning out the people who beat the same note over and over, and those who draw conclusions that just don’t line up with the facts.
Don’t Panic. Bad news often sells well in financial publishing. So, in the time it takes me to go out for coffee, my inbox will fill up with articles from prominent people predicting imminent catastrophe. These people were wrong all during the 30% gain the S&P 500 racked up this year, and many of them have been wrong for the entire 63% gain that the market has racked up since the last major bottom in October 2011.
That doesn’t mean the market won’t pull back. Heck, it may be overdue for a pullback. A correction of up to 10% wouldn’t surprise me. But any pullback is a buying opportunity, not a reason to panic.
This market is incredibly resilient. We should call it the “Flubber” market because it bounced back higher than ever from several scares this year, including drumbeats of war in the Middle East, the budget crisis in Washington and more.
Every single pullback was a buying opportunity… despite the constant cries of alarm from the merchants of fear.
Find the Contrarian Opportunities. It’s easy to let your thinking get into a rut. And it’s so, so easy to go along with the crowd. The problem with going along with the crowd is you miss the opportunities in untrodden pastures. And if you find those opportunities early, the payoffs can be extraordinary.
Mind you, there’s no point in being a contrarian just for the sake of it. If the fundamentals of any investment class are getting worse, then that investment class is likely to get cheaper. It’s only when things bottom out – when bad news is greeted by higher prices – that the real contrarian opportunities can be found.
My resolution is to find more of those contrarian opportunities in 2014.
Argue Less, Discuss More. There’s a poster that I’m going to print out and put over my desk. Here’s what it says: “There are some people who always seem angry and continuously look for conflict. Walk away; the battle they are fighting isn’t with you, it is with themselves.”
In the past, I’ve been one of those dummies who thinks that just because some person is loudly, angrily wrong on the Internet, I have to engage them. I don’t. I’ll be a happier person – and probably a better trader – if I limit my discussions to people who are expressing interesting points of view, even if those are points of view I currently disagree with.
After all, they might be right. If I don’t engage people who disagree with me, I can’t find out if I’m wrong. But I can give my blood pressure a break by avoiding arguments with people who seem to love bickering for its own sake.
Keep an Eye on the Long Game. I don’t know about you, but it’s time for me to start planning my estate, something I’ve put off for far too long. Mortality is one of those inescapable eventualities. If you think you’re getting out of this alive, it’s time for a rethink. And it’s time for meto think hard about estate planning.
I can’t control where and when I’ll die. But I cancontrol the financial picture I leave behind. It could be a simple process that makes things easy on my family, or it could be a giant mess. So this month my wife and I are going to update our wills, which is long overdue, and make a list of who gets what in the safety deposit box, so there’s no fighting. We also need to formally appoint guardians for our children in case we kick the bucket at the same time.
I also need a living will and to appoint someone to make medical decisions if I become incapacitated.
Your own list of resolutions may be different. But it’s time to make that list of resolutions, and stick with it.
Here’s to a great 2014,
Sean
Article By Investment U
Original Article: My Top 5 Resolutions for 2014
