Money Matters

Pixabay photo

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

There are no shortcuts to investment success  — you need to establish a long-term strategy and stick with it. This means that you’ll want to create an investment mix based on your goals, risk tolerance and time horizon — and then regularly review this mix to ensure it’s still meeting your needs.

In fact, investing for the long term doesn’t necessarily mean you should lock your investments in  forever. Throughout your life, you’ll likely need to make some changes.

Of course, everyone’s situation is different and there’s no prescribed formula of when and how you should adjust your investments. But some possibilities may be worth considering.

For example, a few years before you retire, you may want to re-evaluate your risk exposure and consider moving part of your portfolio into a more risk-averse position. When you were decades away from retiring, you may have felt more comfortable with a more aggressive positioning because you had time to “bounce back” from any market downturns. But as you near retirement, it may make sense to lower your risk level. 

And as part of a move toward a reduced-risk approach, you also may want to evaluate the “cash” positions in your portfolio. When the market has gone through a decline, as has been the case in 2022, you may not want to tap into your portfolio to meet short-term and emergency needs, so having sufficient cash on hand is important. Keep in mind, though, that having too much cash on the “sidelines” may affect your ability to reach your long-term goals.  

Even if you decide to adopt a more risk-averse investment position before you retire, though, you may still benefit from some growth-oriented investments in your portfolio to help you keep ahead of — or at least keep pace with — inflation. As you know, inflation has surged in 2022, but even when it’s been relatively mild, it can still erode your purchasing power significantly over time.

Changes in your own goals or circumstances may also lead you to modify your investment mix. You might decide to retire earlier or later than you originally planned. You might even change your plans for the type of retirement you want, choosing to work part-time for a few years. Your family situation may change — perhaps you have another child for whom you’d like to save and invest for college. Any of these events could lead you to review your portfolio to find new opportunities or to adjust your risk level — or both.

You might wonder if you should also consider changing your investment mix in response to external forces, such as higher interest rates or the rise in inflation this year. It’s certainly true that these types of events can affect parts of your portfolio, but it may not be advisable to react by shuffling your investment mix. 

In the first place, nobody can really predict how long these forces will keep their momentum — it’s quite possible, for instance, that inflation will have subsided noticeably within a year. But more importantly, you should make investment moves based on the factors we’ve already discussed: your goals, risk tolerance, time horizon and individual circumstances.

By reviewing your portfolio regularly, possibly with the assistance of a financial professional, you can help ensure that your investment mix will always be appropriate for your needs and goals.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

Stock photo

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

You may have heard that you can simplify your investment strategy just by owning index-based or passive investments. But is this a good idea? 

You’ll want to consider the different aspects of this type of investment style. To begin with, an index-based investment is a vehicle such as a mutual fund or an exchange-traded fund (ETF) that mimics the performance of a market benchmark, or index — the Dow Jones Industrial Average, the S&P 500, and so on. (An ETF is similar to a mutual fund in that it holds a variety of investments but differs in that it is traded like a common stock.) You can also invest in index funds that track the bond market.

Index investing does offer some benefits. Most notably, it’s a buy-and-hold strategy, which is typically more effective than a market-timing approach, in which individuals try to buy investments when their prices are down and sell them when the prices rise. Attempts to time the market this way are usually futile because nobody can really predict when high and low points will be reached. 

Plus, the very act of constantly buying and selling investments can generate commissions and fees, which can lower your overall rate of return. Thus, index investing generally involves lower fees and is considered more tax efficient than a more active investing style. Also, when the financial markets are soaring, which happened for several years until this year’s downturn, index-based investments can certainly look pretty good — after all, when the major indexes go up, index funds will do the same.

Conversely, during a correction, when the market drops at least 10% from recent highs, or during a bear market, when prices fall 20% or more, index-based investments will likely follow the same downward path.

And there are also other issues to consider with index-based investments. For one thing, if you’re investing with the objective of matching an index, you may be overlooking the key factors that should be driving your investment decisions — your goals and your risk tolerance. An index is a completely impersonal benchmark measuring the performance of a specific set of investments — but it can’t be a measuring stick of your own progress.

Furthermore, a single index, by definition, can’t be as diversified as the type of portfolio you might need to achieve your objectives. For example, the S&P 500 may track a lot of companies, but they’re predominantly large ones. And to achieve your objectives, you may need a portfolio consisting of large- and small-company stocks, bonds, government securities and other investments. (Keep in mind, though, that while diversification can give you more opportunities for success and can reduce the effects of volatility on your portfolio, it can’t guarantee profits or prevent all losses.)

Ultimately, diversifying across different types of investments that align with your risk tolerance and goals — regardless of whether they track an index — is the most important consideration for your investment portfolio. Use this idea as your guiding principle as you journey through the investment world.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

METRO photo

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

As you know, the stock market has attracted a lot of attention — and for good reason, as we’ve seen considerable volatility almost from the beginning of the year. But if you own bonds, or bond-based mutual funds, you might also have some concerns. However, it’s important to understand why bonds should continue to be an important part of your portfolio.

To begin with, let’s look at what’s happened with bond prices recently. Inflation has heated up, leading the Federal Reserve to raise interest rates to help “cool off” the economy. And rising interest rates typically raise bond yields — the total annual income that investors get from their “coupon” (interest) payments. Rising yields can cause a drop in the value of your existing bonds, because investors will want to buy the newly issued bonds that offer higher yields than yours.

And yet, despite this possible drop in their value, the bonds you own can still help you make progress toward your financial goals. Consider these benefits of bond ownership:

Income — No matter what happens to the value of your bonds, they will continue to provide you with income, in the form of interest payments, until they mature, provided the issuer doesn’t default — and defaults are generally unlikely with investment-grade bonds (those rated BBB or higher). Your interest payments will remain the same throughout the life of your bond, which can help you plan for your cash flow and spending.

Diversification — As you’ve probably heard, diversification is a key to successful investing. If you only owned one type of asset, such as growth stocks, and the stock market went into a decline, as has happened this year, your portfolio likely would have taken a big hit — even bigger than the one you may have experienced. But bond prices don’t always move in the same direction as stocks, so the presence of bonds in your portfolio — along with other investments, such as government securities and certificates of deposit — can help reduce the impact of volatility on your holdings. (Keep in mind, though, that by itself, diversification can’t guarantee profits or protect against all losses in a declining market.)

Reinvestment opportunities — As mentioned above, rising interest rates and higher yields may reduce the value of your current bonds, but this same development may also offer you some favorable reinvestment opportunities. If you own bonds of varying durations — short-, intermediate- and long-term — you should regularly have some bonds maturing. And in an environment such as the current one, you can reinvest the proceeds of your expiring short-term bonds into new ones issued at potentially higher interest rates. By doing so, you can potentially provide yourself with more income. Also, by owning a mix of bonds, you’ll still have the longer-term ones working for you, and these bonds typically (but not always) pay a higher interest rate than the shorter-term ones.

It might not feel pleasant to see the current value of your bonds drop. But if you’re not selling them before they mature, and you take advantage of the opportunities afforded by higher yields, you’ll find that owning bonds can still be a valuable part of your investment strategy.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC

Stock photo

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

In just a few weeks, students will be heading off to college — and parents will be getting out their checkbooks.

Without a college-bound student in your home right now, you might not be thinking much about tuition and other higher education expenses, but if you have young children, these costs may eventually be of concern. So how should you prepare for them?

It’s never too soon to start saving and investing. Unfortunately, many people think that they have a lot of “catching up” to do. In fact, nearly half of Americans say they don’t feel like they’re saving enough to cover future education expenses, according to a 2022 survey conducted by the financial services firm Edward Jones with Morning Consult, a global research company.

Of course, it’s not always easy to set aside money for college when you’re already dealing with the high cost of living, and, at the same time, trying to save and invest for retirement. Still, even if you can only devote relatively modest amounts for your children’s education, these contributions can add up over time. But where should you put your money?

Personal savings accounts are the top vehicle Americans are using for their education funding strategies, according to the Edward Jones/Morning Consult survey. But there are other options, one of which is a 529 plan which may offer more attractive features, including the following:

Possible tax benefits

If you invest in a 529 education savings plan, your earnings can grow federally income tax-free, provided the money is used for qualified education expenses. (Withdrawals not used for these expenses will generally incur taxes and penalties on investment earnings.) If you invest in your own state’s 529 plan, you may receive state tax benefits, too, depending on the state.

Flexibility in naming the beneficiary 

As the owner of the 529 plan, you can name anyone you want as the beneficiary. You can also change the beneficiary. If your eldest child foregoes college, you can name a younger sibling or another eligible relative. 

Support for non-college programs 

Even if your children don’t want to go to college, it doesn’t mean they’re uninterested in any type of postsecondary education or training. And a 529 plan can pay for qualified expenses at trade or vocational schools, including apprenticeship programs registered with the U.S. Department of Labor.

Payment of student loans 

METRO photo

A 529 plan can help pay off federal or private student loans, within limits.

Keep in mind that state-by-state tax treatment varies for different uses of 529 plans, so you’ll want to consult with your tax professional before putting a plan in place.

Despite these and other benefits, 529 plans are greatly under-utilized. Only about 40% of Americans even recognize the 529 plan as an education savings tool, and only 13% are actually using it, again according to the survey.

But as the cost of college and other postsecondary programs continues to rise, it will become even more important for parents to find effective ways to save for their children’s future education expenses. So, consider how a 529 plan can help you and your family. And the sooner you get started, the better.

*Investors should understand the risks involved of owning investments. The value of investments fluctuates and investors can lose some or all of their principal.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

Pixabay photo

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Now that cryptocurrencies so much in the news, you might be wondering if you should invest in them. But “invest” may not be the right word — because, in many ways, cryptocurrencies, or “crypto” for short, are more speculation than investment.

But what’s really the difference between a speculator and an investor? Probably the main factor is the differing views of time. A true investor is in it for the long term, building a portfolio that, over many years, can eventually provide the financial resources to achieve important goals, such as a comfortable retirement. But speculators want to see results, in the form of big gains, right now — and they’re often willing to take big risks to achieve these outcomes.

There’s also the difference in knowledge. Investors know that they’re buying shares of stock in a company that manufactures products or provides services. But many speculators in cryptocurrency don’t fully comprehend what they’re buying because crypto just isn’t that easy to understand. 

Cryptocurrency is a digital asset, and cryptocurrency transactions only exist as digital entries on a blockchain, with the “block” essentially being just a collection of information, or digital ledgers. But even knowing this doesn’t necessarily provide a clear picture to many of those entering the crypto world.

In addition to time and understanding, two other elements help define cryptocurrency’s speculative nature:

Lack of regulation: When you invest in the traditional financial markets, your transactions are regulated by the Securities and Exchange Commission (SEC), and the firms with which you invest are typically overseen by the Financial Industry Regulatory Authority (FINRA). Other agencies are also involved in regulating various investments. These regulating bodies work to ensure the basic fairness of the financial markets and to prevent and investigate fraud. 

But cryptocurrency exchanges are essentially unregulated, and this lack of oversight has contributed to the growth of “scam” exchanges, crypto market manipulation, excessive trading fees and other predatory practices. This “Wild West” scenario should be of concern to anyone putting money in crypto.

Volatility:  Cryptocurrencies are subject to truly astonishing price swings, with big gains followed by enormous losses — sometimes within a matter of hours. What’s behind this type of volatility? Actually, several factors are involved. For one thing, the price of Bitcoin and other cryptocurrencies depends heavily on supply and demand —  and the demand can skyrocket when media outlets and crypto “celebrities” tout a particular offering.

Furthermore, speculators will bet on crypto prices moving up or down, and these bets can trigger a rush on buying and selling, again leading to the rapid price movements. And many purchasers of crypto, especially young people, want to see big profits quickly, so when they lose large amounts, which is common, they often simply quit the market, contributing to the volatility.

The cryptocurrency market is still relatively new, and it’s certainly possible that, in the future, crypto can become more of an investment and less of a speculation. In fact, Congress is actively considering ways to regulate the cryptocurrency market. But for now, caveat emptor — “let the buyer beware.”

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

Pixabay photo

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

As an investor, you can easily feel frustrated to see short-term drops in your investment statements. But while you cannot control the market, you may find it helpful to review the factors you can control.

Many forces affect the financial markets, including geopolitical events, corporate profits and interest rate movements — forces beyond the control of most individual investors. In any case, it’s important to focus on the things you can control, such as the following:

Your ability to define your goals: One area in which you have total control is your ability to define your goals. Like most people, you probably have short-term goals  — such as saving for a new car or a dream vacation — and long-term ones, such as a comfortable retirement. Once you identify your goals and estimate how much they will cost, you can create an investment strategy to help achieve them. Over time, some of your personal circumstances will likely change, so you’ll want to review your time horizon and risk tolerance on a regular basis, adjusting your strategy when appropriate. And the same is true for your goals — they may evolve over time, requiring new responses from you in how you invest.

Your response to market downturns: When the market drops and the value of your investments declines, you might be tempted to take immediate action in an effort to stop the losses. This is understandable.  After all, your investment results can have a big impact on your future. However, acting hastily could work against you. For example, you could sell investments that still have solid fundamentals and are still appropriate for your needs. If you can avoid decisions based on short-term events, you may help yourself in the long run.

Your commitment to investing: The financial markets are almost always in flux, and their movements are hard to predict. If you can continue investing in all markets — good, bad or sideways —you will likely make much better progress toward your goals than if you periodically were to take a “time out.” Many people head to the investment sidelines when the market tumbles, only to miss out on the beginnings of the next rally. And by steadily investing, you will increase the number of shares you own in your investments. And the larger your ownership stake, the greater your opportunities for building wealth.

Your portfolio’s level of diversification: While diversification itself can’t guarantee profits or protect against all losses, it can help to greatly reduce the impact of market volatility on your portfolio. Just how you diversify your investments depends on several factors, but the general principle of maintaining a diversified portfolio should govern your approach to investing. It’s a good idea to periodically review your portfolio to ensure it’s still properly diversified.

The world will always be filled with unpredictable, uncontrollable events, and many of them will affect the financial markets to one degree or another. But within your own investment world, you always have a great deal of control — and with it, you have the power to keep moving toward all your important financial objectives.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC

METRO photo

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

You might enjoy owning your home — but the mortgage? Not so much. In fact, you might want to do everything you can to pay it off as quickly as possible. But is that always the best strategy?

In one sense, your mortgage can be considered a “good” debt because it’s backed by a tangible asset — your home — that has real value and may even gain further value. Furthermore, by historical standards, you’re probably paying a pretty low interest rate on your mortgage, so you’re getting a lot of benefit — a place to live and a potentially appreciating asset. And if you itemize on your taxes, you can possibly deduct some, or maybe all, of your mortgage interest.

Nonetheless, despite these benefits, a mortgage is still something you have to pay, month after month and year after year. And for some people, it may feel good to pay it off. After all, there may well be a psychological benefit to being free of this long-term debt. But is it really in your best financial interest to make extra payments?

Suppose, for example, that you need a large sum of money quickly for a new car, a new furnace or some other unexpected, significant expense. Or, in an even more serious scenario, what if your job ends and you need money to tide you over until you get a new one? In these situations, you need liquidity — ready access to available cash. And your house may not be the best place to get it. 

You could apply for a home equity loan or line of credit, but these typically require approvals (which might be difficult if you aren’t employed), and you’ll be using your home as collateral. A home equity loan or credit line isn’t always bad — under the right circumstances, it can be a valuable financial tool. But that doesn’t change the basic fact that your home is essentially a non-liquid asset.

So, instead of making extra house payments, make sure you have built an emergency fund containing several months’ worth of living expenses, with the money kept in a low-risk, accessible account. After building an emergency fund, you should weigh extra mortgage payments against other uses of your money. For example, if you have other types of debt — such as credit cards or student loans — you might want to work on paying those off more quickly, as these debts may also carry higher interest rates.

You might also consider increasing your contributions to your 401(k), IRA or other retirement/investment accounts. You could spend two or three decades in retirement, so it’s important to save as much as possible for those years.

As you can see, you do have some good reasons for using any extra money you may have for purposes other than making additional mortgage payments. Ultimately, though, it’s a personal decision. In any case, think carefully about your choice. You may want to review the various tradeoffs with a financial professional, who can possibly recommend the most advantageous strategies. And you may also want to consult with a tax professional. By understanding all that’s involved in the “extra payment” decision, you’ll be better prepared to make the right moves.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

METRO photo

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

As an investor, your own decisions will be the biggest factor in your success. Nonetheless, you’ll always want to consider the potential power of external events. And today is no different — with the lingering effects of the pandemic, the geopolitical situation in Ukraine, the impact of inflation and the rise in interest rates, you might be grappling with feelings of uneasiness. How should you respond?

First of all, remember that the financial markets have shown great resilience through wars, recessions, natural disasters and political crises — events as serious as what’s going on now.

Nonetheless, you could still feel some discomfort when you’re bombarded by anxiety-producing news of the day. But you don’t have to go it alone. Many people have found support and guidance from a financial professional to be especially valuable in turbulent times. 

In fact, more than three-fourths of investors who work with a financial advisor are very or somewhat confident in their knowledge of the impact on the economy on their financial situations, according to a recent survey from Morning Consult, a research and data analysis company. By comparison, the same survey found that only about half of the adults in the general population have this degree of confidence.

Specifically, a financial professional can help you:

Reduce the tendency toward emotion-driven investing. It’s usually not a good idea to let emotions be a primary driver of your investment decisions. For example, if you let fear drive your choices, you could end up selling quality investments — ones that still have good prospects and are still suitable for your needs — when their prices have fallen, just to “cut losses.” A financial professional can help you make informed moves appropriate for your goals.

Put investment results in context. You may wonder why your investment portfolio’s performance doesn’t track that of a major index, such as the S&P 500. But if you maintain a diversified portfolio — and you should — you’ll own investments that fall outside any single index. So, instead of using an index as a benchmark, you should assess whether your portfolio’s performance is keeping you on track toward your individual goals. A financial professional can help you with this task and suggest appropriate changes if it appears you are falling behind.

Recognize investment trends and patterns. If you invest for several decades, you’ll likely see all kinds of event in the financial markets. You’ll see “corrections,” in which investment prices fall 10 percent or more in a short period of time, you’ll see “bear markets,” in which the downturn is even greater, and you’ll see bull markets, in which prices can rise, more or less steadily, for years at a time. A financial professional can help you recognize these trends and patterns — and this knowledge can make it much easier for you to maintain a long-term perspective, which lead to informed decision-making.

Gain feelings of control. Most important of all, a financial professional can enable you to gain a feeling of control over your future by helping you identify your important goals and recommending strategies for achieving them.

The world, and the financial markets, will always be full of events that can be unsettling to investors. But by getting the help you need, you can reduce the stress from your investment experience — and you’ll find it’s easier to keep moving in the direction you want to go.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

Stock photo

By Michael Christodoulou

If you’re a certain age, you’ll need to withdraw money from some of your retirement accounts each year. But in 2022, the amount you must take out may be changing more than in other years — and that could affect your retirement income strategy.

Here’s some background: Once you turn 72, you generally must start taking withdrawals, called required minimum distributions, or RMDs, from some of your retirement accounts, such as your traditional IRA and your 401(k) or similar employer-sponsored plan. Each year, your RMDs are determined by your age and account balances. This year, the life expectancy tables used by the IRS are being updated to reflect longer lifespans. This may result in lower annual RMDs than you’d have to take if this adjustment hadn’t been made.

If you’ve started taking RMDs, what does this change mean to you? It can be a positive development for a few reasons:

Potentially lower taxes: Your RMDs are generally taxable at your personal income tax rate, so the lower your RMDs, the lower your tax bill might be.

Possibly longer “lifespan” for retirement accounts: Because your RMDs will be lower, the accounts from which they’re issued — including your traditional IRA and 401(k) — may be able to last longer without becoming depleted. The longer these accounts can stay intact and remain an asset, the better for you.

More flexibility in planning for retirement income: The word “required” in the phrase “required minimum distributions” means exactly what it sounds like — you must take at least that amount. If you withdraw less than your RMD, the amount not withdrawn will be taxed at 50%. So, in one sense, your RMDs take away some of your freedom in managing your retirement income. But now, with the lower RMDs in place, you may regain some of this flexibility. (And keep in mind that you’re always free to withdraw more than the RMDs.)

Of course, if you don’t really need all the money from RMDs, even the lower amount may be an issue for you — as mentioned above, RMDs are generally taxable. However, if you’re 70½ or older, you can transfer up to $100,000 per year from a traditional IRA directly to a qualified charitable organization, and some, or perhaps all, of this money may come from your RMDs. By making this move, you can exclude the RMDs from your taxable income. Before taking this action, though, you’ll want to consult with your tax advisor.

Here are a couple of final points to keep in mind. First, not all your retirement accounts are subject to RMDs­ — you can generally keep your Roth IRA intact for as long as you want. However, your Roth 401(k) is generally subject to RMDs. If you’re still working past 72, though, you may be able to avoid taking RMDs from your current employer’s 401(k) or similar plan, though you’ll still have to take them from your traditional IRA.

Changes to the RMD rules don’t happen too often. By being aware of how these new, lower RMDs can benefit you, and becoming familiar with all aspects of RMDs, you may be able to strengthen your overall retirement income situation.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

Pixabay photo

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

As you know, 2021 was full of challenges. We were still feeling the effects of the COVID-19 pandemic when supply chains shut down and inflation heated up. So, if you’re like many people, you might not be sorry to see the year come to a close. But now it’s time to look ahead to 2022. And on a personal level, you may want to set some New Year’s resolutions. You might resolve to improve your health and diet, and possibly learn some new skills, but why not make some financial resolutions, too?

Here are a few ideas to consider:

Prepare for the unexpected. If you haven’t already created an emergency fund, now may be a good time to start. Ideally, you’d like to have three to six months’ worth of living expenses in this fund, with the money kept in a low-risk, liquid account. (If you’re retired, you may want your emergency fund to contain up to a year’s worth of living expenses.) Once you’ve got this fund established, you may be able to avoid dipping into long-term investments to pay for short-term needs, such as costly home or auto repairs or large medical bills.

Boost your retirement savings. The pandemic caused many us to reevaluate our ability to eventually enjoy the retirement lifestyles we’ve envisioned. In fact, 33% of those planning to retire soon said they started to contribute even more to their retirement savings during the pandemic, according to a study from Age Wave and Edward Jones. This year, if you can afford it, increase your contributions to your IRA and your 401(k) or other employer-sponsored retirement plan.

Reduce your debt load. The less debt you carry, the more money you’ll have available to support your lifestyle today and save and invest for tomorrow. So, this year, resolve to cut down on your existing debts and avoid taking on new ones whenever possible. You can motivate yourself by measuring your progress – at the beginning of 2022, record your total debts and then compare this figure to your debt load at the start of 2023. If the numbers have dropped, you’ll know you were making the right moves.

Don’t overreact to the headlines. A lot can happen during a year. Consider inflation – it shot up in 2021, but it may well subside in 2022. If you changed your investment strategy last year to accommodate the rise in inflation, would you then have to modify it again when prices fall? And inflation is just one event. What about changes in interest rates? How about new legislation coming out of Washington? And don’t forget extreme weather events, such as wildfires and floods. 

Any or all of these occurrences can affect the financial markets in the short term, but it just doesn’t make sense for you to keep changing the way you invest in response to the news of the day. Instead, stick with a strategy that’s appropriate for your goals, risk tolerance and time horizon. You may need to adjust this strategy over time, in response to changes in your own life, but don’t let your decisions be dictated by external events. 

These aren’t the only financial resolutions you can make – but following them may help you develop positive habits that can help you face the future with confidence.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.