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Building Good Habits as an Investor in 2022

Jean Chatzky  |  January 11, 2022

Why discipline is the missing ingredient for investing in 2022.

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This Week In Your Wallet: All About The Discipline 

You could think of it as bait-and-switch. Or maybe just clickbait. That was my first reaction when the most recent newsletter from Jason Zweig, who writes The Intelligent Investor column for The Wall Street Journal, landed in my inbox. The headline: The Best Investment For This Coming Crazy Year. My second thought was: How un-Jason. I had the opportunity to work with him years ago at Forbes, then again at Money, and he was always the most rational of the rational. Unflappable. Disciplined.

 But then, of course, I started to read, and the investment he’s prescribing as the most needed to get through what’s already shaping up to be a volatile 2022 is, in fact, discipline. (The Dow was down 200 points this morning and the NASDAQ was slowly rebounding after a four day losing streak. Also this week Goldman Sachs projected the Federal Reserve would hike interest rates four times this year, rather than the anticipated three.) “The things that feel most certain aren’t as obvious as they seem — so investors need to beware of taking drastic actions that, later on, they will wish they could undo,” he wrote, going on to document that yes, stocks have occasionally continued to run even after three good years, and that the Federal Reserve has occasionally acted in ways even it didn’t predict.  

Investors are always searching for good ideas, when what they need are good habits,” he wrote. He’s right of course. The best habits: Save often, preferably automatically, so that you don’t have to decide to put money into your portfolio when the market is experiencing a particularly rough patch. History tells us that is the hardest time to buy, and yet, it will inevitably prove to be the best. Pick your mix now, based on your tolerance for risk and the time you have between now and your goals. (And, if you’ve done so by putting your money into a target date fund, understand that it is meant to be a one-and-done solution. Keeping money in other funds simultaneously will just mess up your asset allocation.) Then tune out the noise. That may mean not monitoring the markets. Unsetting alerts. Whatever you have to do to settle your nerves so that you can stay the course that you’ve set. 

Money Rules, Not My Own

As many of you may know, I’m a big believer in Money Rules. In fact, I wrote a whole book of them. So, of course I was intrigued to see which rules showed up on Economist Larry Kotlikoff’s list. Kotlikoff, a best-selling author of books on Social Security and Medicare is out with a new one called Money Magic. Among my favorites of his rules:

Owning a home can reduce longevity risk. For those of you who haven’t heard the term, that’s the risk of running out of money because you live longer than expected. If you rent, he notes, you risk continuing price hikes from your landlord. By owning, you lock down your costs.  (Even if home prices collapse, he notes, you’re insulated because you’re not moving.)

Don’t worry about job hopping. A “credible job offer,” he writes, is the fastest way to boost your pay. I agree – especially now – that young people worried about too many moves on their resumes can explain making a move for pay.

Wait until age 70 to take Social Security. This isn’t possible for everyone – if you need to put food on the table, of course you take it early. But most of the time, waiting is a strategy that will boost your monthly checks by a bundle. Here are 6 Things To Consider Before Filing Early. 

Time To Talk Taxes

Chances are pretty good you’ve yet to receive your 2021 W-2s and/or 1099s. And yet, here’s a heads up about the tax season that lies in the offing. You’re going to want to get a jump on it, particularly if you’re anticipating a refund. That’s because, as The Washington Post warned yesterday, the Treasury Department is already saying they’re going to be delayed.

As the paper reported, in typical years the IRS starts tax season with a backlog of about a million returns. This year, they’ve got several times that. And there are other hurdles to clear, including a 25% reduction in staff and the pandemic-related closure of in-person offices that left fewer people to implement big changes, like the Child Tax Credit and stimulus payments. There is money earmarked for the IRS in President Biden’s Build Back Better plan, but that plan is currently stalled. 

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Have a great week! 


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