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How to be a Successful Investor Over All 12 Months

MonthsMark Twain once commented on the celebration of New Year’s and said something to this effect:   Last week everybody smoked his last cigar, took his last drink and swore his last oath.  This week we are a pious and exemplary community of investors.  Cheers to another new year as we leave last year’s obituaries behind.  Take a deep breath and let’s figure out what we all need to do more of so we can celebrate what we want to experience more of – profitable trades.

The cornerstone of profitable trading is routines.  My experience with new investors is that they begin to “short circuit” when I explain that they’ll need more than their one “buying routine” to succeed.  Imagine how these same folks react when I show them the complete roadmap of investment routines.  Suddenly, they need the equivalent of an emotional Band-Aid.  I try to convince them that the total can indeed become greater than the sum of individual parts by combining investment routines into a comprehensive written trading plan.

At this point, I hope I have moved them beyond mere curiosity and I have their undivided attention.  I explain that they must be willing to jab two fingers into the eyes of both the dragon of self discipline and the dragon of emotional control.  Once they muzzle and gain mastery over both these beasts, they can move on in their quest for profits.

Part of that quest in the broadest sense is to layout your investing routines on an annual basis.   I‘ve often used the “slinky” metaphor to describe the human nature of investors.  If you don’t do some strategic planning, you’ll find yourself and your trading resembling something of a series of events that stretch out the slinky and at some inopportune future time, come screaming back at you as the slinky once again compresses.  Painful, unproductive and unnecessary!

So here I propose a roadmap for the coming year to allocate your broad investing activities across all 12 months that will contribute to you maximizing your profits and minimizing the “slinky tail slap”.  By tackling these few tasks each month over the year, it will be quite manageable.  Try my plan and jettison the slinky.

JANUARY:  Update your net worth.  Contribute to your retirement plans (check if limits have increased).

FEBRUARY:  Gather up all your paperwork and start preparing taxes.  Revisit all your account information and update it (don’t forget to update your passwords).

MARCH:  Review your broad asset allocation strategies with respect to your family and your own personal risk tolerance.  Evaluate your portfolio diversification and present correlations to the markets.

APRIL:  File your tax return.  Review your emergency cash needs and the adequacy of your existing funds.

MAY:  Retirement review.  Are you saving enough to retire when you plan to?

JUNE:  Review your children’s educational goals and your financial needs.  Review your written investment plan (preferably while sitting by a pool with some ice tea).

JULY:  Half-year portfolio performance review, relevance and adjustments.  Revisit the percentage withholding on your paycheck.  Is it enough to cover your income taxes?

AUGUST:   Insurance review – check adequacy and deductibles.  General asset protection review.  Before you invest it, you have to protect it!

SEPTEMBER:  Meet with your estate attorney to plan and update your will to reflect changes in the law.  Check your debt situation.  Are you comfortably under control?

OCTOBER:  Evaluate your workplace benefits.   Review your medical, dental and disability insurance coverage for adequacy.

NOVEMBER:  Review any sizeable gains and losses to make smart moves before December 31st. Make any final charitable contributions before year-end.  Talk to your accountant about any tax law changes that might impact you.

DECEMBER:  Reassess your present asset allocation.  Are you over or underweighted in any of the key asset baskets?  Do a performance review of all investments before year-end.

In closing, I’d like to quote golfing great Ben Hogan:  “As you walk the fairway of life, you must smell the roses, for you only get to play one round.”  So muzzle your dragons and get it right.

Trade well; trade with discipline!
-- Gatis Roze

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