Thanksgiving is just around the corner. And like all holidays, this one has plenty of traditions, such as Macy’s Thanksgiving Day Parade (started in 1924) and football (the first broadcast Thanksgiving Day game was played between the Detroit Lions and the Chicago Bears in 1934).
Traditions are important, and you may want to establish some in one of the key activities of your own life: investing.
So, what sort of investment traditions could you start? Here are a few ideas:
▪ Invest regularly. By definition, engaging in a tradition means performing the same acts over and over. This type of behavior can impose discipline and consistency to your investing. For example, consider contributing the same amount of money each month to the same investments. When the price of these investments is down, your contribution will pay for more shares – in other words, you’ll be “buying low,” one of the key principals of investing. And when the price of your investments is up, you’ll be a savvy enough investor to buy fewer shares. Over a long period, this technique can help lower the per-share price of your investments, but it does not guarantee a profit or protect against loss. To make it easier to follow through, you could set up monthly, automatic purchases of these investments from your checking or savings account.
▪ Increase 401(k) contributions when you get a raise. Why not make it a tradition to boost your contributions to your 401(k) or other employer-sponsored plan every time your salary increases? Your 401(k) is a great way to save for retirement, as your contributions are typically made with pretax dollars, resulting in lower taxable income, and your earnings can grow on a tax-deferred basis. Even if you don’t reach the contribution limit (which, in 2015, is $18,000, or $24,000 if you’re 50 or older), you can help yourself make progress toward your retirement goals if you give your 401(k) a “raise” every time you get one.
▪ Review your progress at least once a year. Pick one day a year – perhaps a milestone day, such as your birthday or wedding anniversary – to review your overall investment picture. Are your investments performing the way you had hoped? Is your portfolio properly diversified, or are there gaps you need to address? Are you investing too aggressively or too conservatively? A yearly review of your investments and long-term financial strategy, possibly with the help of a financial adviser, can help keep you on track toward your objectives. Of course, you don’t need to wait 12 months before looking over your situation; you may need to adjust your holdings during the course of any given year, in response to changes in the financial markets or your individual needs. But by committing yourself to at least one full-scale review a year, you can greatly reduce unpleasant surprises while staying abreast of exactly where you are and where you’re headed.
On Thanksgiving, you can enjoy the holiday’s traditions, along with those that may be unique to your family. And someday, you may well be thankful that you followed some productive investment traditions.
Keith Sandvoss: 803-802-4310