David Baskin: Four resolutions for investors in 2009
- January 16, 2009 8:38 AM |
- By Michael Hlinka
Money Talks is a daily business column from CBC radio.
By David Baskin, president of Baskin Financial Services in Toronto
(Listen to the audio version of this column.)
Few of us can resist the temptation of New Year’s resolutions. As we all know, keeping them can be a lot harder than making them. Here are four resolutions that investors should try hard to observe during 2009.
I will do my homework. Nowhere does the proverb “act in haste, repent in leisure” apply more than in the world of investments. It is hard enough to be a successful investor when armed with a well-researched plan. How much more difficult then is it to succeed when an investment is based on a whim, a tip, or a half-remembered comment. No good investment will evaporate while you take the time to read an annual report and see what the analysts have to say, but many a bad one will be avoided.
I will watch my weight. Most investors know that a well diversified portfolio is one of the keys to long term success. Over time, some investments will go up and they may come to dominate a portfolio. Others may drop and become too small to have a meaningful impact on performance. Holding over-weighted stocks increases portfolio volatility and risk; holding under-weighted ones creates distraction and clutter. Watching your weight means re-balancing your portfolio a few times a year to ensure that it meets your goals.
I will not be greedy. While 2008 ended in tears, there were many great gains in the first half. Shareholders made 83 per cent on Research in Motion if they sold in June, but lost 56 per cent if they held it all year. Potash holders were up more 70 per cent in June, only to end the year down 37 per cent. No one has a crystal ball, and no one knows just when to sell, but professional investors often sell half of a position to lock in a gain. Better to leave some money on the table than to lose it all.
I will be respectful of others. Sometimes when we like a stock, it becomes like a favourite child. No disparaging opinion will be considered, no matter how well reasoned or argued. Keeping an open mind can be hard, but one way to do so is to read what naysayers write, and to respect their views. More often than we would like to admit, they turn out to be right.
Keeping these four New Year’s resolutions won’t guarantee a profitable year of investing, but they will give you a fighting chance.
Best wishes for the New Year.
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- Kira Vermond (73)
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- Michael Hlinka (183)
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