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13 Resolutions for the New Year

Posted by: Brian Dennehy
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New Year resolutions are usually destined to be broken; we know this from personal experience.  But that is usually because the bar is set too high, leading to inevitable failure.  Here are 13 things you can do now to make yourself a better investor and improve your investment prospects.
 
Our list for 2018 is slightly extended.  We were inspired by common (often recurring) investor mistakes that we've witnessed this year and in previous years.  With a little investment of your time you can start 2018 on a positive note. 
 
  1. I will not be distracted by fund charges.  I will obsess over performance net of charges.  This is how we present our research and it’s essential that you grasp this concept.  It is important to avoid both expensive and cheap poor performers.  An expensive fund that significantly outperforms will be of more value to you than a cheaper fund that is poor to mediocre at best.
  2. I will only rely on fund ratings that have a proven track record.  Ask your adviser or fund platform to explain how they calculate their ratings (in plain English!) and to show you the detailed historical evidence for how their ratings add value.  If they can’t do this find another adviser or fund platform!
  3. I will review my investments regularly, and not tolerate failing performance.  Having a process to review your investments is pivotal to a successful investment strategy.
  4. I will not buy expensive fund of funds without a good reason.  Again, performance has to be a key driver in your investment choice.  While they are improving many “fund of funds” or “mixed asset” funds are expensive and, at best, mediocre performers.
  5. I will not invest in Absolute Return funds that are absolutely hopeless.  Too many funds in this badly named sector are very poor.  There are one or two gems, but otherwise take care.
  6. I will not be swayed by optimists or pessimists.  I will listen to rational analysis.  This way I will be cautiously optimistic, no more or less.
  7.  I will be wary of fund labels.  They can be misleading and give no indication of true investment risk e.g. funds in the “Absolute Return” sector can often be nearly as volatile as the stock market.
  8. I will not invest in something if I don’t fully understand the risks.  If you don’t understand an investment, however enthusiastically recommended, it is probably not appropriate to your needs.
  9. I will demand that payouts from my income funds grow each year.  Critical to understand.  Income investors need to appreciate the importance of consistently growing income payouts from their income funds.
  10. I will be wary of tax efficient investments.   Tax efficiency is good.  But if an investment is being recommended to you primarily for the tax benefits, be wary of the underlying investments.
  11. I will not be sold mediocre funds by High Street banks.  We mention this every year but it still happens in scale.
  12. I will stop treating my financial adviser as a friend.  You obviously need to have a good relationship with your adviser.  But make sure that it is your needs that are clearly understood and that their actions are geared towards achieving your stated goals.  Remember, when all is said and done, you are paying them.
  13. I will expect my financial adviser to add value.  A good adviser will offer solutions based on a sound investment process and understanding of your situation and goals. 
 
ACTION FOR INVESTORS
  • Have another read through the above...
  • ...pick the 5 that YOU think are most relevant and keep note of them, somewhere you can look back on in a year’s time
  • Relax and enjoy the holiday!
Topic: Investment research


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BNY Mellon 2019

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