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News & Commentary

New Year's resolutions 28 Dec 11

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Perhaps it may be a worthwhile exercise over the Christmas break to spend a little time thinking about how to improve your personal finances and investments over the next 12 months.

Time spent in quiet contemplation away from the distractions of work may be highly rewarding.

Perhaps, you might take a clean sheet of paper – or set up a new document on your tablet computer or laptop – and jot down a few pointers or resolutions for the New Year.

Here are a few starters to consider (and perhaps discuss with a financial planner):

Try to keep emotions out of your investment decisions. This could be particularly crucial in the year ahead given expectations for a highly volatile market and global economic uncertainty.
Focus on ensuring that the long-term or strategic diversification of your portfolio between investment classes (mainly shares, bonds, property and cash) is appropriate for your circumstances. By focusing heavily on asset allocation, you are less likely to be distracted and disturbed by day-to-day market “noise”.
Concentrate on what you can control. You can’t control the emotions of the investment herd that typically sells when markets are low and buys when markets are high. But you do have a fair degree of control over your investment costs, the tax-efficiency of your portfolio, and your asset allocation. (These New Year resolution suggestions tend to be closely linked.)
Check your superannuation position. How has your fund performed over the long-term compared with its peers with similar asset allocations? Are your salary-sacrificed and other superannuation contributions sufficient given your circumstances including age, income level and expectations for a certain lifestyle in retirement? A factor to keep in mind for the New Year is that the standard cap on concessional contributions by members over 50 will halve from 2012-13.

And another thing, it might be time to redo your household budget. (For a few ideas, see ASIC’s personal finance website)

* Written by Robin Bowerman, Principal, Corporate Affairs & Market Development at Vanguard Investments Australia.
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