Making Financial Resolutions? Remember these Maxims for the New Year
Despite the continuing COVID pandemic, growing inflation, and other factors, 2021 was a great year to be invested in the markets. What will 2022 be like? Although you’re sure to find plenty of predictions on the internet, the truth is, nobody knows. As Dimensional Fund Advisors’ Executive Chairman and Founder, David Booth, likes to say: the market has no memory, so it’s best not to try to figure out when to get in the market and when to get out. As he pointed out in this article at the end of 2019, it’s better to figure out how much of your portfolio you’re comfortable investing in equities over the long term, so you can capture the ups and ride out the downs.
If you’re making financial resolutions for 2022, Booth’s advice is still timely and truthful. Without knowing how the market will perform, the best we can do is set our personal goals, understand our tolerance for risk, and work to design a portfolio that can withstand the inevitable volatility the markets experience from time to time.
When Savant started investing in 1993, the founders established a set of 30 maxims that still apply today as a guide to managing investments and helping our clients pursue their ideal futures. You can read the full list here, but we’ve highlighted the six key areas and the central ideas behind our maxims below.
As you develop your financial resolutions for 2022, we hope you’ll keep these central tenets in mind and resolve to create an investing strategy that will serve as the bedrock for all your decisions. Having a sound, well-planned strategy will help you to stay the course when things get tough and ride the wave when the markets do well.
Throughout the year, your resolve will be tested. Whenever you’re tempted to think, “This time is different,” remember that it’s always different. When news about the COVID-19 pandemic sent the markets into freefall in March of 2020, even some experts cracked under the pressure. But history has shown us that while markets have experienced many major declines over the years, the subsequent years for U.S. equity returns have been positive on average. Investors may have thought 2020 felt different at the time, but those who stayed patient and invested saw the markets recover a short time later.
Whatever 2022 resolutions you may make, we hope you’ll commit to remembering Savant’s maxims and return to them whenever you’re tempted to stray from your plans. And if you have questions, our advisors are always here to help. Best wishes for a happy and prosperous New Year.