Investing Resolutions for the New Year

 | Dec 26, 2013 | 3:00 PM EST  | Comments
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With the New Year around the corner, it's the season for resolutions, even investing resolutions. Losing weight or quitting smoking aren't the only resolutions that can add to your (financial) well being. The New Year starts the performance meter all over again, so why not strive to become better than before.

Resolution One: Eliminate complacency.

Thanks to a 30% rise in the S&P, everyone in 2013 thinks they are skilled investors. Humble yourself and recognize a rising tide lifts all boats. A dart- throwing monkey was likely to do well in 2013. At the Coke annual meeting this year, CEO Kent asked his largest shareholder Warren Buffett for advice. Buffett told Kent to not allow Coca-Cola (KO) to become complacent. If that's the advice for the most dominant beverage company in the world, then it surely is sound advice for every single investor. Always strive to get better.

Resolution Two: Pay Attention to Price

The biggest value that comes from watching the stock market is observing the prices reflected on any given day. A great company is not necessarily a great investment. Price determines whether the investment is attractive. Money is made on the buy side; you just don't know it at the time. Price can render an inferior asset a better investment than a superior asset. Heading in 2014, prices are going to matter a lot.

Resolution Three: Conduct Your Own Due Diligence

The best thing about investing is that you can begin with a huge head start. Instead of looking at thousands of stocks, you can narrow the list to a hundred or so by simply focusing on what successful investors are buying. Let folks like Buffett, Icahn, and others do the leg work for you. Each quarter, investors are told what the best investors are buying. Start with these names. Though you may be tempted to invest immediately, always do your own due diligence. Just because Buffett dropped $10 billion into IBM doesn't mean you have to. He may have a 10-year hold period. Follow the greats, but only after you understand the investment. You will become a better investor for it.

Final Resolution: Learn From Your Mistakes

This is perhaps the most invaluable skill of all. Long-term investment success is not about always picking winning investments. It's about minimizing losses. Since losses are inevitable, the only way to minimize them is to learn from the past mistakes so you don't repeat them again. Spend more time learning from your mistakes than relishing your winning investment.

Oh yes. Resolve to enjoy another year from your friends at RealMoney. Happy New Year!

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