As we near the new year, setting resolutions will be on the minds of many. Feeling in need of a fresh start, many individuals create goals for themselves centered around weight loss, self-improvement and making better financial decisions.
“Making better financial decisions” sounds like a wise thing to do in theory, but what all does that actually entail?
For many, one of the most overlooked resolutions within that bucket revolves around investing. When it comes to your portfolio and investing techniques, it’s easy to “set it and forget it” in a sense, but it’s a missed opportunity not to take advantage of aligning one’s resolutions with changes in your portfolio.
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While investors don’t need to make tweaks constantly, the new year can serve as a reminder to check in with your approach, where you are today and where you want to be over the short and long term.
As we head into 2020, here are three resolutions to consider specific to your investment portfolio:
1. Implement a defensive strategy.
It’s no secret that 2019 saw its fair share of market volatility. In fact, many in the industry are saying that we are in the “ninth inning” of this bull market, so a downturn — to some extent — is inevitable.
While we are cautiously optimistic, there are market concerns at play — including the Fed cutting rates again, geopolitical turmoil and the upcoming political season expected to dominate the headlines for the next 12 months.
While we don’t recommend taking the chips off the table heading into 2020, we do recognize where the markets may go. Implementing a defensive strategy can reduce portfolio volatility while still providing long-term capital appreciation. For example, the health care and utilities sectors have a defensive nature and may be worth working into an overall allocation in the new year.
2. Set new, or shift, philosophies.
The beauty of today’s market environment is that there are new ways individuals can approach their investments. For example, five to 10 years ago, investing philosophies such as SRI (socially responsible investing), ESG (environment, social and government) and faith- or values-based investing were in their infancy stages with only one or two fund families that offered niche products.
Now, with hundreds of products on the market within these arenas, investors have easier access and the ability to truly align their values with their portfolio. According to a survey conducted by Bank of America, 82% of high-net-worth investors who align with ESG portfolio choices — ones backing companies that are good corporate citizens — see investing as a way to directly express their personal values.
At the start of the new year, take time to determine what values define or matter to you. Are you anti-tobacco? Do you support water-preservation efforts? Do you want to avoid companies that align with gambling? Have an open dialogue with your financial professional and highlight what matters to you, and he/she can identify appropriate solutions to weave into your portfolio.
3. Do more.
Every company has room for growth and room to make an impact. Understand that as an investor, you have the power to do more. For example, there are faith-based investment companies — like GuideStone® — with shareholder advocacy programs that work to encourage other companies to evolve based on community and consumer preference (e.g., CVS opting to take tobacco off their shelves). The goal is to take your investing habits to the next level by engaging with companies to communicate why your values matter in your investment decisions.
With 2020 right around the corner, remember that setting resolutions for the new year is about taking a specific interest in amplifying your portfolio and making the intentional effort to adopt those changes. Over the coming weeks, work closely with your adviser to implement these resolutions and others that may be important to you.
As with any resolution, the road to success begins with the desire to change and the thoughtfulness to create a solid plan.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
