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My friends at Dimensional Fund Advisors have put together a list of sensible investment resolutions that all of us can find useful. If you have additional financial resolutions that you would like to share please send me an e-mail (firstname.lastname@example.org) and I will update this blog. I look forward to your feedback. Here are some resolutions to ponder:
1) I will not confuse entertainment with advice. I will acknowledge that the financial media is in the entertainment business and their message can compromise my long-term focus and discipline, leading me to make poor financial decisions. If necessary I will turn off CNBC and turn on ESPN or HGTV.
2) I will stop searching for tomorrow’s star money manager as there are no gurus. Capitalism will be my guru since capitalism provides a positive expected return on capital and it is there for the taking. For me to succeed, someone else does not have to fail.
3) I will not focus my portfolio in a few securities or even a few asset classes, as diversification remains the closest thing to a free lunch.
4) I will ensure my portfolio is appropriate for my goals and objectives while only taking risks worth taking.
5) I will manage my emotions by learning about and acknowledging the biases and cognitive errors that influence my behavior.
6) I will keep my cost of investing reasonable.
Most of us find it hard to follow a sensible diet or a sensible investment strategy 100% of the time. Just as successful athletes rely on coaches and trainers to help them achieve their goals, most investors can probably benefit from having a ‘financial coach’ to remind them about their resolutions and keep them on track toward a more prosperous future.
I wish you good health and good wealth in 2011.