The Most Important Thing to Do Before New Year’s Day

Rachel Gearhart
by Rachel Gearhart, Managing Editor

new year's day 1 0

"But it's the holidays..."

We've all heard it before...

It's our go-to excuse for neglecting diets, exercise regimens and social engagements.

But most concerning, we hear it from investors as an excuse to slack off on their finances.

"But it's the holidays..." is not an excuse for neglecting your portfolio. In fact, it could be costing you money.

Now's the time when you should be giving your portfolio some added attention. It will ensure you enter 2019 with a boost of momentum.

And here's why it's so important...

Asset allocation is responsible for as much as 90% of your long-term investment returns. That's right. It's not stock selection that matters most. It's how you spread your risk among different asset classes that will make or break your wealth.

In a previous Investment U article, Chief Investment Strategist Alexander Green wrote...

In my experience, sophisticated investors know that asset allocation is their single most important investment decision. Unsophisticated investors, on the other hand, generally don't even understand the concept.

"Yeah, yeah, I get asset allocation," a relative told me recently. "It means diversify."

Not exactly.

You can own an S&P 500 Index fund and be broadly diversified. After all, you'll own a piece of 500 different companies.

This is certainly superior to rolling the dice with a couple of stocks.

But unless you think your ideal asset allocation is 100% U.S. large caps - and, incidentally, the U.S. market has not been the world's best-performing market even a single year in the last 30 - that kind of diversification isn't enough.

That's why the Club makes an asset-allocated portfolio - such as Alex's Gone Fishin' Portfolio - the foundation of the Oxford Wealth Pyramid. We call it the Core Portfolio.

This model is designed to help you conserve your assets, build your wealth and reach your long-term financial goals by beating inflation and generating above-average returns with below-average risk.

A solid asset-allocated Core Portfolio will allow you to take advantage of shorter-term, more aggressive investing strategies without risking your wealth.

And it's been tested time and time again.

Case in point: $100,000 invested at the inception of Alex's Gone Fishin' Portfolio in 2003 - with dividends reinvested and the portfolio rebalanced on the last day of each year - would have turned into $330,275 by the end of 2016.

Not too shabby.

But your job isn't done once you create your Core Portfolio...

Once a year, you need to rebalance it.

Often, investors are eager to rebalance when their portfolios are underperforming... and take a "But it's the holidays..." approach when they're outperforming.

It's one of the biggest mistakes an investor can make.

Think about it this way... If you let one position grow too large, it will become a threat to your entire portfolio.

If something happens to it, your other positions will be too weak to offset the loss.

For example, if you have 55% of your portfolio in tech stocks and the Nasdaq has a down day... there goes a big chunk of your nest egg.

You'd be surprised how many times we hear stories just like that from investors.

We don't want you to make the same mistake.

If you find yourself saying, "But it's the holidays..." stop. You're only setting yourself - and your portfolio - up for failure in the new year.

Take several minutes to evaluate your assets - look at your bank accounts, your brokerage accounts, your mutual fund accounts, and your IRA or 401(k) at work. How are they invested? How much of each is in stocks? How much is in bonds, and how much is in cash?

If they aren't allocated according to a proven model like ours, take several minutes to restructure them. It will give you the momentum you need going into 2019.

Good investing,


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