The New Year often
causes individuals and
investors alike to take
stock of their lives and portfolios.
We are not keen on New Year’s
Resolutions, preferring a year-
round approach to improving your
portfolio and your life. But if you
are the Resolution type, then we
have some for you. Here goes:
(1) Maximize your tax-deferred accounts. In addition to your RRSP, don’t neglect your contributions
to your tax-free savings account. The government
has just increased the annual contribution limit for
the TFSA, to $5,500 annually. Use it!
(2) Take a look at your investments. If you have
a stock that is way down from where you bought
it, and you are ‘hoping’ it will recover, then sell it.
Investing is different than hoping. If you have a
stock that you are not willing to buy more of—
right now—then it is time to get rid of it. Even if
you think it will at least stop declining this year,
the lost opportunity elsewhere can be costly.
(3) Take a look at your mutual fund statements.
If you own a mutual fund that has more than 100
different securities in it, then—guess what—you
own an index fund, or at least one that will perform
in line with the index. Too many positions dilutes
active management, so you might as well sell that
fund and buy an ETF instead. The difference in
fees over the long term will be a huge boost to your
investment returns.
(4) Stop trading your investments so much. Buy
good companies, and keep them. Don’t try and
‘trade around’ positions. The costs of trading and
the bid-ask spread as well as taxes (if applicable)
just aren’t worth it. Besides, if you own a good
company, why would you ever sell it?
We think it will be an OK year for investors. Maybe
not great, but there will be still be lots of opportunities to
make money. There are lots of bad headlines, of course,
but that is nothing new. Dividends continue to rise, and
the economy is slowly getting back together.
Enjoy the Year!
Peter Hodson, editor
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