New Year Financial Resolutions: A Fresh Start

Whether you call them resolutions, goals, or even just a yearly review, it’s important to go into the new year with a full sense of your investments—both good and bad.

As we look ahead to 2022, there are a few financial resolutions investors can take to help optimize their portfolio, safeguard against risk, and improve overall financial well-being. Whether you’re looking for new opportunities or merely a sense-check of your portfolio, there are plenty of ways you can set financial goals for the new year—and beyond.

Here’s what you need to know about updating your investments in the year to come.

Rebalance Your Portfolio

The first (and perhaps most important) step in reevaluating your portfolio is checking if it’s balanced. By that, we don’t mean its actual financial total, although that’s important as well. Balance in this sense refers to your asset allocation—the percentage of funds you have in different kinds of investments.

You might be familiar with the 60-40 rule of investing, which is the notion that most portfolios should dedicate 60 percent of their holdings to stocks and the remaining 40 to bonds. According to a sizable number of investment professionals, the 60-40 rule is outdated, but it does help demonstrate how you can think about the balance of your assets across different investment classes.

When you rebalance your portfolio, think about your long-term investing goals, risk tolerance, and the timeframe in which you want to hold your investments. Rebalancing your portfolio might mean introducing more diversification among asset classes, especially if there are some that you’re missing. A robust mix of long- and short-term investments, as well as those in liquid and illiquid holdings, are key when rebalancing your positions. You should also be sure to rebalance as you hit different investment milestones, particularly if you’re investing for retirement.

Prepare for the Unexpected

As we witnessed in 2020 & 2021, nothing is for certain—particularly with regard to the markets. The COVID-19 pandemic began with a market free-fall, only to see the markets soar beyond historical highs. The global economy grapples with inflation at the end of 2021 that, without drastic improvements to the world’s supply chain and other seismic shifts, could create financial woes that stretch into 2022. In other words, economic headwinds are harder than ever to predict.

They don’t, however, have to be impossible to safeguard against. It’s important for investors to do what they can to be proactive with their portfolio, even if we can’t time the markets. This means diversifying, seizing new opportunities, and hedging against exposure to volatility in your portfolio.

Everyone’s portfolio is different, of course. In most cases, it’s crucial to hedge against the main drivers of market volatility, especially when markets—be they financial or consumer—are erratic. Inflation is on the rise and may be so for the foreseeable future, for one example. This means any inflation-exposed investments, such as those in retail companies or other consumer goods providers, could end up dragging or losing value. To safeguard against this, it’s important to have the right countermeasures in place.

A hedge against inflation can go a long way here. One of the best hedges against inflation is within real assets. These typically take the form of real estate, commodities, or other tangible assets that appreciate outside of the stock market. Real assets can offset potential instability when stocks are shaky and bonds don’t deliver value in a low-interest environment. With these two factors on the minds of investors going into 2022, it’s more important than ever to prepare for their impact—among other potential phenomena in the year to come.

Commit to Learning More about a New Investment Opportunity

There are more investment opportunities than ever before. This new year, consider learning more about an investment type you may not know much about already. If you’ve heard about NFTs, cryptocurrency, or more commonplace alternative investments but have no idea what they are and if they’re a fit for your portfolio, this could be the perfect opportunity to learn more.

Some investment types are net-new, such as Bitcoin and non-fungible tokens that prove ownership of digital assets. Others are new versions of previously out-of-reach investment types, such as farmland, that tech-forward companies have made more accessible for a broader array of investors. Each has its merits and risks as well as plenty of reasons why they’re worth exploring in more detail.

Many investors are paying increased attention to the opportunities provided by fractional ownership. Online platforms make it possible for investors to own a fraction of an asset, rather than the entire thing. This has made many investment types approachable for the first time, particularly if it was too expensive to own them outright in the past (such as farmland or fine art).

Broaden Your Horizons

Investing can be intimidating, whether you’ve got a few hundred to put in or hundreds of thousands of dollars to allocate. It’s crucial not to be overwhelmed by your portfolio or the investments you might not have in your portfolio yet. That’s why it’s critical to expand your knowledge of current investing trends, especially if there are opportunities out there you’ve yet to explore.

The era of stocks and bonds being the dominant investment vehicles is over. Investment funds spurred a revolution in investing that made it easier for the average investor to capitalize on broader market exposure with less hands-on management. Now the real opportunities exist beyond the markets themselves.

Alternative investments, once the domain of institutional investors and the ultra-rich, have now become more common among a broader pool of investors. If you aren’t well-versed in alternatives, now is the time to learn. Thankfully it’s never been easier to start with alternatives no matter your comfort level or expertise. Platforms like FarmTogether make it easy for newcomers to understand how alternative investments work, what role they play in your portfolio, and why they pose unique advantages that other and more well-trodden investment types can’t.

Making the Most of a New Year of Investing

Whether you decide to review your investments at the ringing in of the new year, at tax time, or any other part of the year, the important thing is to keep track of your portfolio consistently. The dawning of a new year provides you with a great, built-in reminder to review existing investments, make new moves, and plan for the future.

If you’re looking to add diversification to your portfolio this coming year, alternative investments are a great option. With alternatives, you get the upside of low-correlation assets that don’t fluctuate with the markets. You can also broaden your portfolio’s exposure to different market sectors and industries in ways that aren’t possible through conventional investments.

One of the biggest opportunities in the world of alternative investments is farmland. Farmland investing helps build resilience into your portfolio that helps hedge against inflation while also opening up the possibility of long-term returns based on historical performance.