Five New Year’s Resolutions Every Investor Should Make

You owe it to yourself to take these steps for a healthier financial future.

Markets had a good 2020 and it’s almost a given that we will have a 10-15% pullback in early 2021 but based on current economic numbers, low-interest rates, and light at the end of the tunnel on the COVID crisis, we are planning for gains of 6-8% by year-end 2021.

Don’t ignore a pullback. Don’t close your eyes and hope it goes away. Stop listening to the headlines of fear and uncertainty and believe in the American economic growth engine. Take these steps in early 2021 to ensure you have a stronger financial future.

1. Clean up your old accounts

Consolidate and rollover your old 401k/403b accounts that could be under performing so you don’t lose track of them. Rebalance your current investments. 2020 saw nice gains in large and small growth stocks. It’s okay to sell some of those stocks and reinvest into other parts of your asset allocation plan; like large company value stocks.

2. Commit to protecting your financial accounts

780,000 consumer data breaches happen per day. 30% of phishing emails are opened. The US Government, healthcare companies, and schools have all been hacked. The number one issue is poor passwords and clicking on links in emails. The easiest thing you can do is “resist the click” and do not click on links in emails and go directly to the website. Why? Hackers place malicious software in the links that unknowingly download an app to your computer or phone that track your typing and can record you typing your passwords. It can also scan your email and financial accounts for usernames and passwords. The hackers then gain access to your financial accounts and inflict financial damage.

Commit to using strong passwords. Apps like LastPass, securely encrypt your passwords and allow you to store, find, and copy them into your financial websites and apps. You will never need to remember a password again. Passwords should be changed at least twice a year and at least 12 characters long.

Use an anti-virus app on your computer and phone like Norton 360. And no matter how badly you need to connect to the internet, never, ever connect to an unsecured WIFI network. Always use a secure WIFI connection. iPhone users, rest assured, your iPhone is secure and transmissions are encrypted. If you haven’t already, get an iPhone!

3. Increase your Roth 401k/403b contribution by at least 1-3%

The Roth 401k/403b is not linked to a traditional Roth IRA so if you cannot contribute to a traditional Roth IRA you can always contribute to a Roth 401/403b regardless of your income.

4. Switch to a high deductible healthcare plan and open a Health Savings Account (HSA)

The HSA is the most powerful retirement savings tool because of these three features, it is more powerful than a 401k/403b:

Contributing to an HSA will decrease your taxable income
Increase your flexibility in paying out-of-pocket healthcare costs like copays and start investing your HSA balance for triple tax-free benefits of a tax-deductible contribution
Tax-free growth from investments and tax-free withdrawals for healthcare bills

5. Hire a modern fee-only financial advisor

It’s a modern financial world and the markets and tax code are more complex than ever. Hire a financial advisor that is also an expert in tax law and uses technology to communicate and present you with a transparent view of your investments. That gives you one advisor with twice the advice.

Two recent studies by Russell Investments, the creators of the Russell 2000 Index and Vanguard Investments, the low-cost mutual fund company, finds that working with an advisor generates between 2.88% – 3.0% in value to your investments from systematic rebalancing and behavioral coaching. Basically, minding your investments and saving you from making bad investment decisions, or not making any decisions at all.

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Tom Taylor, CPA/PFS

Tom has over 25 years of experience in finance and accounting. Before founding Chesapeake Financial Advisors (CFA) in 1998, Tom started his career at the international accounting firm Ernst & Young as an auditor in the Financial Services Industry Group. He then joined Legg Mason as an Investment Banking Analyst. In this role, he acquired extensive transaction experience in common and preferred equity stock offerings, mergers and acquisitions and fairness opinions. This experience laid the foundation to branch out and form CFA.