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As another calendar year comes to a close, we have opportunity to reflect on what has been an interesting, trying, exciting and tumultuous twelve months.  The list is long and the emotions are high.  Elections, Ebola, World Cup, ISIS, Ukraine, Economy, Immigration, and on it goes…as it does every year.

On a more personal level, most investors have probably experienced changes in their family, career, health, goals, and/or finances.  All things considered, year-end is a time to perform a status check on your financial picture.  Start with the question, “How did I do in 2014?”

Most investors would respond with an investment return figure.  While that certainly is important, returns are only a slice of the overall financial pie that dictates the realization of set goals.  In fact, portfolio returns are really just a product of the decisions and subsequent actions you take throughout the course of the year.  Strive to make your goal not one of “maximizing” return, but rather achieving a return over the long-term that is necessary to accomplish your objectives.  Investing without the context of holistic financial and life goals will be forever a frustrating experience.  Consider this time-tested list of good habits:

  • Match your investments with your goals.  Don’t pursue return on your dollars outside the scope of your financial plan.  Remember, risk and reward are related!
  • Pick an investment allocation that’s right for you and stick with it unless your circumstances change.
  • Rebalance your portfolio periodically to ensure your mix doesn’t get more risky than you intend.
  • Tune out the noise.  Don’t try to time markets or react to newspaper headlines and TV “talking heads.”  Academics have repeatedly demonstrated that this tactic is not likely to work in your favor.
  • Have an emergency fund.  Regardless of earnings and retirement savings, having short-term cash in a liquid account is absolutely prudent for life’s unexpected opportunities or crises.
  • Keep investment costs down.  If you don’t know what you are paying today, find out.  If you don’t know whether the amount is high relative to industry averages, do some homework and seek a professional investment second opinion.
  • Maximize your 401(k) deferrals to ensure you are receiving your full company match.
  • Save more.
  • Pay off debt…there is no greater guaranteed return on your dollars than eliminating encumbrances and their associated interest costs.

Just like the list of world events from 2014, the financial checklist is long.  So, how did you do this past year?  Make some headway or need to catch up?  Either way, do yourself a favor and consult with your team of advisors to ensure you are on track toward your goals.  If you don’t have a team, get one.  Make sure it includes someone in a fiduciary capacity.  Oh, and I almost forgot (not really)…stay diversified.




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