Happy New Year! Happy 2018!
I usually find the New Year to be a relaxing time. Christmas and all of the craziness along with it is over. Family travel has been accomplished. No more parties, but parties can be time-consuming. Everyone is back to work and accomplishing something. Kids are back in school. I have been accused of being a Christmas humbug. Why is that?
Off With a Bang!
Often, the stock market begins the new year with a bang! Last year, 2017, saw a continuation of the rally that started with Trump’s election in November 2016. The market continued up and volume was strong. The previous year, 2016, started with a bang going the other way. China was having another hiccup and the US stock market reacted poorly. The S&P 500 index declined over 10% from 1/1/16 to 2/11/16, whereupon it went back to an uptrend.
It will be interesting to see what happens this year, in 2018. I predict there will be heavy volume. With the market as strong as it was in 2017, and with investors sitting on profits, what will they do? Will they sell after the New Year? If they hold their positions through the New Year and then sell right afterward, they can postpone paying their capital gains for another year, or at least for another quarter. However, with the new tax code, will it be more or less advantageous to delay realizing capital gains until after the new year?
Many people resolve to go to the gym and lose weight after New Year. Notice that the Weight Watchers and the Jenny Craigs of the world increase their advertising after New Year. Instead of (or maybe in addition to) resolving to lose weight, how about resolving to get your financial house in order? That may be just as productive and contribute to your health and longevity. Stop spending so much (you have to pay your Christmas credit card bills). It also works well with a diet resolution: Vegetables are cheap. Instead of going out and partying, go to the gym or go for a run (cheaper yet) and eat your vegetables. It will be much better for you and for your pocketbook. By the way: I liked vegetables – cooked. I have tried vegetable smoothies and juices, but the green ones taste like swamp water. They can be pretty expensive, also. Save money and go buy Kale and other greens in the produce department of your store, and eat them maybe with some olive oil and vinegar. Very healthy and inexpensive. Diet recommendation that is also a financial recommendation.
Another resolution is to look at your portfolio and reallocate it if you want to. If you have money in a retirement account, maybe your 50/50 stocks/bonds mix is now 70/30 stocks. The New Year is a good time to bring that allocation back into line. Remember that you are a year older now and a year closer to retirement. The closer you are to retirement, the less risk you should be taking in your portfolio. That could mean becoming more diverse. If you are long in individual tech stocks, some of which may have run up a lot in 2017, maybe you think about selling those and instead investing in index funds. That way, you are still invested in equities but you are more diversified and less subject to individual company risk.
On another plane, maybe 2018 is the year you get serious and contact a Financial Planner. Getting sick is not the only reason you go to the doctor – you should go to the doctor for your annual “wellness exam”. Likewise, although being financially “ill” is not the only reason to work with a Financial Planner. You really should set quantifiable, attainable goals for yourself, whatever your age. A good Financial Planner can really help you in this process. You can work with a family member or loved one to help you, but you get what you pay for. There are many versions of Financial Planners who charge in many different ways. My firm charges fees based on the time we work and does not collect commissions. Everything is on the up-and-up.
My recommendation: Resolve to take control of your own financial life and to establish clear goals that you can reasonably achieve. Write down your goals. Think about 12/31/2018 and resolve that you want to look back upon 2018 and take comfort that you have either achieved or are on the way to achieving the financial goals that you articulated at the beginning of the year.