Risk Management, Trading & Portfolio Strategies

Have you made any of these New Year’s investing resolutions?

Changing the way you think about   investing may be the key to success in 2014.

Changing the way you think about investing may be the key to success in 2014.

It's a new year, and while many people will be making promises about going to the gym or eating better, investors may be better served setting goals about their finances and investment choices. The following are a few investing and financial resolutions that could benefit you in 2014: 

Increasing retirement savings

According to an October 2013 study conducted by Wells Fargo, over a third of middle class Americans say that they'll never retire and another third say they would need to keep working until they were 80. Why? Many started saving for retirement too late, or had never stored enough away. In addition to putting part of your income into tax-deferred retirement accounts like 401(k)s and IRAs, consider increasing the amount of direct investing that you are engaging in. If you are concerned about risk or market volatility, remember that if you are many years away from retirement, it is unlikely that a diverse portfolio will result in a net loss.

Looking beyond fads

It's easy to get caught up in the excitement of initial public offerings and the "hot stocks" of the moment, but investing in any company without doing your research may be detrimental to your returns. Your portfolio should include plenty of stocks from companies that have a long track record of success. If you do choose to invest in some of these fad stocks, remember the importance of actively monitoring the progress of your investment, and be ready to follow your exit strategy. 

Saving for emergencies

Many individuals get consumed in investing for retirement, but forget that they always need easily accessible funds in the event of an emergency. A good rule of thumb is to have about six months of living expenses put away in a savings account. 

Not allowing emotions to influence investment decisions

Fear, greed and excitement can cause investors to make rash and unwise decisions. Any choices to buy or sell any assets should be based on accurate research. This is also why it's important to create an exit plan in advance. If you are unsure about your stock's progress, but it has not yet met your established exit criteria, you may want to consider riding out the storm. 

Managing taxes and fees

Trading fees can quickly add up, so consider their cost whenever you are planning on selling. If you are using the services of a financial advisor or a brokerage firm, make sure you understand how their trading and commission fee structure will affect your total profits. 

Depending on the type of investment, the income that you make from stocks may be taxed. You will have to report this "unearned" income on your tax return. Consulting with a tax lawyer or an accountant will help you stay in compliance with the Internal Revenue Service (IRS). 

Understanding the risks and strategies involved with ETFs and ETNs 

Exchange traded funds (ETF) and by extension traded notes (ETN) have become popular alternatives to traditional mutual funds. They are advantageous products because their fees are generally lower and investors can buy or sell them at a known price at any point of the day, rather than at the set price after trading hours. Unlike mutual funds however, investors of ETFs and ETNs may not actually own the underlying assets in a fund. There is nothing wrong with buying into ETFs and ETNs, but make sure you understand how they actually create investment returns. It may be necessary to discuss your concerns with a financial advisor or fund manager. 

During this new year, consider using SmartStops' investment analysis and portfolio management software to minimize your risk.

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