Financial Tips for 2018 Are:
Prepare for uncertainty
Several political and economic events caught observers by surprise in 2016, including the results of the Brexit vote in the United Kingdom and the presidential election in the United States. Markets respond to surprises with volatility, and I expect more surprises in 2017. With a new U.S. administration comes the potential for changes to policies that affect investors. Some may be beneficial; some may trigger market volatility. The best approach in any environment is to maintain a long-term perspective and a balanced and diversified portfolio.
In addition to potential near-term volatility, I expect the stock and bond markets to produce lower returns in the next ten years than they have over the past several decades. This will place the burden on investors to save more. I recommend saving 12% to 15% of your income for when you want to stop working. Saving more is an asymmetrical proposition: If you don’t save enough and the markets don’t bail you out, there’s nothing you can do. If you over-save and do well, great—you can stop working a few years earlier.
Great investors understand how all the pieces fit together. Become familiar with the funds in your portfolio and know the role that each one plays in your investment plan. Stay abreast of the markets and economy, but don’t be driven by their movements. I realise it sounds paradoxical to say stay current but resist the urge to act. But that’s exactly what you should do. If you do not have the time or inclination to actively manage your portfolio you should be invested in high quality multi-asset funds, the best managed of which are not available at retail level.