If there is a theme for 2013, it may be “known unknowns.” As I write this a few days before Christmas, taxes, federal spending, the pace of domestic and global economic growth, and the European sovereign debt situation are all factors that we know could potentially impact stocks. We don’t know how each will evolve, however. Positive outcomes or at least the expectation of progress could boost stock prices. Negative outcomes or the expectation of further uncertainty could hurt stock prices.
As investors, we are often confronted with uncertainty. Uncertainty, however, can bring opportunity, especially to those who are focused on the long term and stick to disciplined strategies. To help you do this, here is my updated list of investing resolutions to follow for the new year.
1. Write down the reasons you are buying an investment. One of the most fundamental rules of investing is to sell a security when the reasons you bought it no longer apply. Take a look at your current holdings and ask yourself what were the exact reasons you bought them. Do you remember? I personally keep a journal, so I don’t have to rely on my memory to cite the exact characteristics of a stock or a fund that attracted me to it.