I like the dreams of the future better than the history of the past.- Thomas Jefferson

 

Here we go again. It’s time for Rosh Hashana and the High Holidays. We are preoccupied with trying to improve ourselves in the upcoming year, based on looking back and examining where we fell short of our goals. Being a better spouse, not yelling at the kids, helping an elderly neighbor carry the groceries, are just some of the goals that we set for ourselves to become better individuals.  While it’s certainly not trendy in today’s fast-paced, remote-control culture, taking time out to reflect on the past and thoughtfully plan for the future is the only way to truly improve.

 

Writing about the concept of repentance Rabbi Shraga Simmons says, “Teshuva literally means ‘return’. When we ‘do teshuva,’ we examine our ways, identify those areas where we are losing ground, and ‘return’ to our own previous state of spiritual purity.” In many ways this means recognizing where we erred and then hitting the rest button, and trying again.

 

While preparing ourselves spiritually takes front and center at this time of the year, now is a great time to hit the reset button on our finances, and get back on track financially. By taking some time to review your investment mistakes of the last year, you can become an improved investor and get back to building the wealth you need to become financially independent.

 

Reject “hot tips”

It’s actually quite simple. The way to make money over the long run is by sticking to a strategy. University researchers studied why investors, using available technology to copy exactly what successful investors like Warren Buffet are buying and selling, are unsuccessful?  The conclusion: Investors lack the discipline to exactly follow what the ‘top investors’ are doing. They start interjecting their own analysis into the equation, don’t buy or sell all the same stocks, and ultimately underperform the market.

 

The “remote-control” culture is also played out in the arena of investing. Turn on the TV, check your email inbox, or even go to the gym for a workout, and you are likely to hear about ‘hot stocks’ that will make you rich in a very short time. Who needs to own a stock that increased by 8% in value and pays a nice dividend when you can own the next high-flying technology stock? What inevitably happens is that investors tend to quickly buy a ‘hot tip’ only to then sell it as soon as the next ‘tip’ comes along that they must buy.  

 

Goal setting

Investors need to look forward. You need to define your goals. Whether you invest to fund your retirement, to pay for children’s’ weddings, to leave an inheritance for the next generation or a combination of these reasons, understand your goals and invest with those goals in mind. Due to the emphasis placed on performance by the financial media, investors often pay too much attention to that and too little attention to why they are investing. If you need your money in a year or two to buy an apartment, you may have to accept getting a small, guaranteed return on your investment as opposed to ‘trying to beat the stock market’. Stock market gyrations and returns are almost irrelevant to an investment portfolio with a short term horizon and where principal protection is the ultimate goal. If you understand your goals and you invest with an eye on meeting them, your chances of success will be much greater.

 

May we merit a happy and healthy New Year.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.