Five Resolutions Investors Can Actually Keep in 2022
By Laura Webb, founder and CEO of Webb Investment Services, Inc.
It’s the season for resolutions. The approach of a new year kicks off a period of reflection on the changes people want to make regarding their lifestyle choices. Lose weight? Eat healthier foods? Exercise more? There are resolutions for that. Easy to declare, so much more difficult to actually keep.
Some resolutions represent promises that are doomed to be broken. The commitment needed to fulfill them simply is too far of a reach, especially when they depend solely on will and determination. The success of a promise to make radical lifestyle changes requires a coach and the support of a like-minded group.
Fortunately, individual investors have the benefit of a certified financial plannerTM professional to help them keep the resolutions they make regarding the health of their wealth. The financial health of the investor is just as important as his or her physical health and well-being.
Here are five questions investors can ask themselves to determine what their resolutions might be when the ball drops on 2022.
- Do I have my credit card account balances under control?
Credit cards are great payment methods. They’re easy to use and accepted almost everywhere. But runaway credit card debt, especially when you don’t pay off the balances in full, can represent a drain of your cash on hand. Plus, interest rates on the balances can be high. According to creditcards.com, with the Fed projecting up to three rate hikes for 2022, credit card interest rates are all-but-certain to climb in the new year.[1} All the more reason to pull back on your card spending and pay down that debt before you make any new investment decisions.
- Do I have enough accessible cash to cover unplanned expenses?
It’s important to maintain a cash account for emergency funds in the event of unexpected household expenses. If you haven’t considered building your reserves, the new year is a great time to create that confidence. Most financial advisors recommend a reserve fund that covers 6-12 months of expenses; 12-18 months for retirees.[2]
- Do I have enough cash in my portfolio to take advantage of investment opportunities?
There is an old adage that goes “Trees don’t grow straight to heaven.” The same metaphor applies to investing. Savvy investors (and their certified financial PlannerTM professional “coaches”) know that investment opportunities surface when the market dips and stock prices fall. But falling stock prices are not necessarily signs of failing companies. Some of the most well-known and legendary companies have weathered market fluctuations in tough times and recovered quite nicely. That’s why maintaining a cache of uninvested savings can help you optimize opportunities to buy shares in companies that are otherwise on solid footing and just need time for their markets or the economy to rebound. Have a meeting or a call with your CFP® professional to evaluate whether a company’s earnings outlook has changed or it’s just reflexive selling that is driving down prices. Keeping 8-10% of your portfolio in cash can be sufficient to jump on low stock prices of promising companies.
- Do I need to modify my investing strategy to account for inflation?
The subject of how long the current inflationary cycle (2021-?) will persist is open to debate. Some economists see 1-3 more years of high inflation; others are more optimistic in its duration. So, your resolution might be to adjust your already well-diversified portfolio to include a greater emphasis on stocks or other equities, which historically do well in an inflationary environment. Money languishing in bank accounts loses value due to inflation. Even with inflation now hovering near 6%, major market indices are showing positive gains.
- Do you invest in line with your value system?
If you’re a proponent of companies that advocate for clean energy, diversity and inclusion in their companies, or support strong data privacy and regulatory governance practices, make a resolution to invest at some level in these types of organizations. Your CFP® professional can point you to investment opportunities with companies that respect the environment, behave as good citizens in the treatment of their employees and govern themselves according to high ethical and regulatory standards.
Not all these suggested resolution ideas apply to every investor, but some may resonate and make sense as we end one investing year and begin another. Cheers to a safe, healthy and prosperous year in 2022!
Laura Webb is the founder and president of Webb Investment Services, Inc., based in Asheville, NC. She is a CFP® professional and the creator of the Her Two Cents podcasts, which focuses on helping women normalize the conversation around money. Her team focuses its efforts on helping women secure their financial futures. For the rest of the story, please visit the Webb Investment Services, Inc. website or email her at laura.webb@raymondjames.com.
Webb Investment Services, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc. 82 Patton Ave, Suite 610, Asheville, NC 28801. 828-252-5132.
Any opinions are those of Laura Webb and not necessarily those of Raymond James.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.
Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon decision, please consult with your financial advisor about your individual situation.
Sources:
1 Creditcards.com, Rate Report, December 22, 2021
2 Cash You Need in Retirement, money.com, Diane Rosato, July 2015