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7 Investing Tips for 2024

7 Investing Tips for 2024

December 26, 2023

7 Investing Tips for 2024

Alas, 2023 is coming to a close and what a roller coaster of a year it was for investing. Literally. Take a look at the S&P 500. If that was a ride at Cedar Point, you would wait in line 2 hours for it. Here are a few highlights:

  • Interest rates move the needle. At least a portion of last year and this year's results in investing can be attributed to the rise of interest rates and the effect that has on business financing and stock performance. The Fed released recently that they may be looking to decrease interest rates next year which has led to the recent increase in overall market value. I discussed interest rates and how the affect the economy in detail in this previous blog post
  • Stocks bounced back. 2022 was a disappointing year in the stock market and people reacted as they usually do during market downturns. As an advisor, I fielded a large number of calls asking about safer investments like precious metals and even some around doomsday scenarios. 2023 was a nice reminder that over time stocks have historically been solid performers. It was a solid year for this category and has led us to an all-time high in the S&P 500. 
  • Volatility is consistent. This is my weak attempt at a finance joke but the one consistent in this world is inconsistency. That was clearly on display as we saw downturns in January, March, and October but had upward trends during the summer months and the last two months of the year. It will be exciting to see which direction 2024 goes.
  • Tech stocks are king. At least when it comes to 2023 returns they are. The "Magnificent 7" led the way which is a group that consists of Apple (AAPL), Microsoft (MSFT), Google (GOOGL), Amazon(AMZN), Nvidia (NVDA), Meta Platforms (META) and Tesla (TSLA). These 7 stocks saw gains over 50% with Nvidia having a gain of over 200%. 

With the new year upon us, it is common for all of us to review our lives and decide on what changes we would like to make. We all consider our physical and mental health but here are 7 areas to considering when it comes to improving your financial health in 2024:

1. Review and Update Your Budget

I know, I know. Budgeting is not fun. No one wants to scrutinize how they spend their money or be told to spend less because let's face it, spending money is fun. I am not denying that fact. I mean, I spent over $30 on chocolate over the weekend (Chocolate Charlie to be exact. A chocolate, marshmallow, and peanut concoction sent from heaven itself). Let us also remember that by keeping a tight budget now we have more freedom and ability to spend money on fun stuff in the future. Delay your gratification.

Inflation is still causing prices to go up so review your expenses to ensure you have an accurate estimate on each category. You might be surprised to find your property taxes or insurance rates have gone up and you need to account for them. 

Once your budget it updated, I recommend setting up an automated way (we will talk about that in a second) to track your spending and review it on the first of each month to see how you tracking. A plan isn't any good if you don't follow it so be sure to hold your family and yourself accountable. 

2. Use Technology To Free Up Your Time

This is a tie in to the budget section but for gosh sakes, download a free budgeting app. There are several out there (I personally used Mint but that is being phased out at the end of the year) so find one you like and use it. These apps allow you to connect your bank account, credit cards, investment accounts, and even your home value to track things like your budget and net worth. I used an Excel spreadsheet for years and can tell you that these apps make it much easier and even categorize your expenses for you. Schedule a budget check-in on the first of each month to spend 20 minutes go over your prior month's expenses with your family to ensure everyone is doing their part.

Another technology benefit to take advantage of is automating bill pay and investment deposits. We all have enough to do without having to remember to pay bills at the end of each month and contribute to our retirement accounts. Set it and forget it. I have yet to meet a person who can do both of these things consistently without having them automated. 

3. Check Out Real Estate Investing

It isn't earthshattering news that real estate has been a hot market the last few years and has been shown to be a reliable investment historically. As with any investment, it has it's pitfalls. Investing in real estate can be a complicated endeavor. Having to find a house for a reasonable price, be approved for a loan, front money for a down payment, navigate the closing process, perform any needed upgrades, and find a renter that will pay their rent on time AND not destroy your house are just a few of the barriers to entry. Let us not forget property taxes. And insurance. And running over to fix the sink after the renter's kid lodges their gum down the drain. If you can't tell, I am not a fan of having rentals (say it ain't so, Joe!) BUT I am a big fan of investing in real estate as part of your portfolio. 

If that sounds like a contradiction, I assure you it is not. I invest into Real Estate Investment Trusts or REITs. REITs are public traded companies that own and operate real estate that produces income and allows investors to invest into their company. You invest the same way you would a mutual fund and then earn a share of the income produced through the company owning real estate without having to deal with any of the headaches described above. With the chance of decreased interest rates next year and the economy still showing strong indicators, take a look at REITs as an alternative to investing in real estate. 

4. Review/Rebalance Your Current Investing Strategy

The end of year is where I take time to analyze both the families I work and my own portfolio performance. Even with a year like 2023 where we saw average returns over 20% in the stock market, there is always something to be learned. Analyze which parts of your portfolio did well and which did not. Does it make sense to keep the same strategy because or should you reconfigure? 

Another practice I like for end of year is rebalancing your portfolio. This is where you buy and sell funds to return your allocation percentages to their respective target amounts. For example, pretend you had a simple portfolio of 60% stocks and 40% bonds. Throughout the year stocks did well but bonds did not so at the end of the year you have 64% of your money in stocks and 36% in bonds. To rebalance you would sell off some of your stocks and buy more bonds to brings the percentages back to 60% stocks and 40% bonds. The theory is that if you strategy is sound, you will be putting more money into the underperforming category with the hope that it will perform better in the future to be more in line with it's historical averages and bring up your average annual returns. 

5. Top off that Emergency Fund

The holiday season is expensive. Gift giving, travel, and Chocolate Charlie (seriously, this stuff is so good) can all leave your cash reserves looking a little like malls nowadays. Empty. Tighten up those budgets (did I mention that one yet?) and build up your emergency fund to 3-6 months worth of expenses to ensure you are ready for that next surprise doctor's visit or furnace malfunction. 

You can expedite this process by picking up a temporary side gig such as being an Uber driver, delivering takeout, delivering groceries, walking dogs, and good ol' fashioned baby sitting. Keep in mind, you won't always have to devote your extra hours to these endeavors, just long enough to resupply your funds and then it's back to watching "Yellowstone" in the evenings.  

6. Treat Yourself to an Enjoyable Experience 

This one goes out to all those out there who find it difficult to spend money. The fact you are reading a financial advisor's blog tells me you likely take this stuff pretty seriously and fit into this category.

I meet with a lot of people who grew up in frugal households where money might have been tight or spending frivolously was looked down upon. To these people. promise yourself you will spend money on something you have been dreaming of doing. It could be a trip to Bermuda or it could be buying that new video game console. Life is for living. There are times where we do without because of low income or bills which is admirable but there also comes a point where we should realize life isn't just work, bills, and taking out the trash. Invest in your wellbeing by giving yourself permission to enjoy your wealth this year. 

7. Review Your Insurance Policies

When it comes to insurance, there is no shortage of options for your car, home, life, disability and long term care insurance needs. I would split your insurance review into two parts:

  • Part 1: Compare your insurance needs to what you currently have insurance for. Do you have an adequate amount of health insurance? Should you get life insurance? Does disability or long term care insurance make sense for you? These are questions you should be able to answer with confidence. If you cannot, it may make sense to reach out to a professional to understand if your needs are covered. 
  • Part 2: Compare rates from different providers. Don't fall into the trap of having the same provider for years without looking to see what else is out there. It is not unusual to save hundreds of dollars per year by shopping for a better rate. Just be sure to go with a reputable company and not sacrifice service for a rock bottom price. 

Bonus Tip: Reach out to a Financial Advisor 

I get it, I am a financial advisor and you think this is a sales pitch. I am the first to say that not everyone needs a financial advisor. Heck, I fumbled my way through when I started investing with little guidance and eventually I got the hang of it. There are two morals of that story:

  1. Finance is my passion. Not many people will start their day by reading financial news, check on markets throughout the day, and spend their evenings researching mutual fund performance and changes to 529 accounts. Like most things, in order to truly be successful at it, it helps to enjoy the process. I do but you might not. 
  2. Imagine if in those first few years I had someone guiding me and I didn't make the mistakes I did. This would have likely led to better returns. Then quantify those returns out for the next 40 years with compound interest and.... I don't like to think of how much money I might have lost out on.

People hire personal trainers to develop their workout routine, diet, and hold them accountable. Financial advisors do the same thing but with your financial health.

If there is any part of you that has been wondering if there is anything about your plan that could be improved, feel free to reach out. I offer complementary initial consultations to go over the details of your situation. Worst case scenario, you learn your plan is sound and you are on track to meet your goals. Best case scenario, we alter you plan to gain you more years in retirement, more time with your family, and less nights stressing about your money obligations. 

Good luck!