As we head into the new year, just about everyone’s mind is on one thing: New Year’s resolutions. You may want to eat healthier, get more exercise, or spend some time with a good book in 2024. While you’re putting together this list of ways to make your life better in the coming year, you may focus on these lifestyle moves — and that’s great. But don’t forget about another important way to make your year and the years ahead brighter. I’m talking about adding some investing resolutions to your list.
A few good moves today could set you on the right path to financial freedom over the long haul. What better time to launch the plan than at the start of a new year? And here’s the best news yet: You don’t need a fortune or an excessive amount of discipline to make these five top investing resolutions and keep them going over time. So, let’s get started…
Image source: Getty Images.
1. Commit to monthly investing
Why invest on a monthly basis? Because this healthy routine could help you progressively grow wealth over time — especially if you don’t have a large sum to invest right from the get-go. Maybe you don’t have $10,000 to pour into stocks — but you might be able to afford a monthly $50 or $100 commitment. The amount is entirely up to you, and thanks to fractional shares, you really can start investing in many top companies with pocket change. You can start positions in a particular stock or stocks and add to them or initiate new positions over time.
This monthly initiative also offers you an ongoing way of controlling your financial future — and a reason to regularly follow the news from your favorite companies.
What if you don’t find a buying opportunity during a particular month? No problem. You can set your money aside and dip into this “opportunity fund” when you’re ready to hit the buy button again.
2. Remember your risk tolerance
Before buying any asset, it’s crucial to understand your tolerance for risk. Remember to keep this in mind all year, no matter what the market is doing. For example, even if cryptocurrency is soaring, if you’re a very cautious investor, you probably should think twice before hopping on the bandwagon. Crypto, as a newish area, is risky, so it may not be the best long-term fit for you.
And, if you’re an aggressive investor, you may want to scoop up growth players at interesting prices even at times when everyone else is fleeing them.
By sticking with your investment style, you’ll feel more comfortable, make better decisions, and have a better chance of winning over time.
3. Favor diversification
To favor diversification, invest in various industries and types of companies instead of just one area. For example, you may want to buy shares in consumer goods, technology, healthcare, and financial players — and within those industries invest in well-established players as well as smaller, young players.
Why do this instead of favoring just one industry or type of company? Because it’s a way of reducing risk. If technology shares suffer during a particular time period, you might see a drop in your tech investments — but your holdings in other areas may compensate for those losses.
Still, don’t forget to consider your risk tolerance when diversifying — if you’re cautious, you may want to favor healthcare stocks and take a smaller position in technology, for instance.
4. Don’t worry about near-term moves
We’ve all experienced this: You buy a stock, and then the next day, it declines. But don’t worry about these sorts of short-term moves. Even if your favorite stock posts a bad month or year, instead of focusing on this performance, look to the company’s long-term prospects.
If the company’s future looks bright, the stock may have what it takes to recover from its recent tough times and go on to deliver growth to your portfolio in the future. Ideally, you should hang on to a stock for at least five years, giving you plenty of time to benefit from the company’s growth.
Amazon (AMZN 0.46%) offers us a good example of this, as the stock tumbled back in 2022 when the company struggled with rising inflation — but over time the stock has delivered top returns to investors. (And it went on to gain again in 2023.)
5. Consider dividend stocks
Finally, resolve this year, whether you’re a cautious or aggressive investor, to consider buying a few dividend stocks. You might look for Dividend Kings like Johnson & Johnson (JNJ 0.31%) or Coca-Cola (KO -0.15%) because they have a more than 50-year track record of dividend growth.
These companies will pay you passive income year after year just for owning them. You’ll appreciate this in difficult market times, as dividends will limit any potential losses — and in better times they’ll offer your portfolio an extra boost. You might choose to collect your dividends each year, or you can even reinvest them into the same stock — an easy way to increase your position without taking a dime out of your pocket.
So, as you’re finalizing your list of 2024 resolutions, remember your financial goals and the idea of growing wealth over time. Commitment to these five investing resolutions could help you along that path — this year and over the long haul.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.
