Happy New Year! It's already been an interesting one so far. At FVIM, Rob Pool is back in action following some necessary foot surgery. In the meantime, Matt Ebeling's son learned how to ice skate during the holidays. In almost no time, he'd abandoned his "trainer" (like a walker, but for using on ice) and was tearing around on his own. "That's for kids," he insisted. What could we do but hold our breath, and let him go?
As an investor, you may feel like you could use some extra oxygen yourself as the markets swoop back and forth in dizzying fashion. As we've covered many times before (here and here) in the long run we expect the markets to deliver positive returns, but we must accept that we only have so much control over its in-transit rough-and-tumble antics.
To start off the year on the right foot, here are five best financial practices worth tackling in 2019, along with some related quotes to inspire you to action. By focusing on good financial habits you can control, you're best prepared to make the most of the rest.
1. Stay the course with your investments.
If markets remain as volatile as they are as we draft this post, among the most important "actions" you can take is to do nothing in reaction to the near-term noise – especially if you've already built your investment portfolio to reflect your goals and risk tolerances. The point of having a plan is to depend on it as your big-picture guide, because the close-up view is uninformative.
"Successful investing is about controlling the controllable. You can't control what the market does, but you can control what you do in response. In the long run, your returns depend less on whether you pick good investments than on whether you are a good investor." – Jason Zweig, The Wall Street Journal
2. No plan in place? No time like the present!
What if you've not yet built a plan to guide your investment activities? In that case, it's time to create one today. A best practice for participating in the markets is to do so according to a well-crafted plan tailored to your circumstances. In the absence of a plan, the best you can hope for is luck. That's not only a nerve-wracking way to go, you're less likely to achieve your goals if you're not deliberately investing toward hem.
"Where people get killed is getting in and out of investments. They get halfway into something, lose confidence, and then try something else. It's important to have a philosophy." – David Booth, Dimensional Fund Advisors
3. Replenish your rainy-day fund.
Stock markets aren't the only source of uncertainty. Life itself can surprise you. To best weather stormy markets, a personal crisis or both, it's best to have some spendable (liquid) cash set aside. By having a rainy-day fund, you'll be better positioned to stay the course with your long-term investments during scary markets, knowing you're covered should an imminent spending need arise.
"Cash is like a seat belt — vitally important when needed, but annoying the rest of the time. Nevertheless, we wear the seat belt all the time, and we likewise keep a prudent portion of the portfolio in cash." – Craig Israelsen, PhD, Financial Author
4. Tend to your cyber-security.
There are so many ways to better protect your online security, and it's important to do so. In 2013, we published a helpful paper, which still applies today. A couple of relatively simple acts you should include in your best habits include periodically changing key passwords (using "strong" passwords that are hard to guess); and checking your credit reports, using AnnualCreditReport.com to request your annual free reports from all three major credit-rating agencies.
"But if he does really think that there is no distinction between virtue and vice, why, Sir, when he leaves our houses let us count our spoons." – James Boswell, The Life of Samuel Johnson (1791)
5. Connect and communicate with your loved ones.
At the end of the day, other best investment practices pale in comparison to your ability to connect your wealth to your life's aspirations. For most families, that includes generating financial independence for yourself, your children (as they reach adulthood) and potentially your parents as they age. Have you spoken with your parents about retirement or legacy concerns? Have you mentored your children on money matters? If not, consider 2019 a good year to begin.
"Someone's sitting in the shade today because someone planted a tree a long time ago." – Warren Buffett, Berkshire Hathaway