As the year draws to a close, it’s time to review the performance of my Stocks and Shares ISA, and see what lessons can be learned. With significant exposure to the UK economy, and some badly-timed purchases just prior to Russia invading Ukraine, it hasn’t been a good 12 months.
So, as we move towards 2023, here are my five New Year’s resolutions to make me a better investor.
1. Stop looking at the market every five minutes
I have developed a bad habit of checking share prices several times a day.
This is dangerous because it sometimes puts irrational thoughts into my mind. It’s easy to panic if a stock is performing particularly badly during a given day. In these circumstances, I have often been tempted to make a rash decision and sell.
2. Keep reinvesting those dividends
The key to building long-term wealth is to re-invest dividends.
A study by IG found that £10k invested in the FTSE 100 at the start of 1986 would have grown to £53,394 by the end of 2020. However, if the dividends received had been reinvested, the initial stake would have grown to £195,852.
I intend only to invest in stocks that have a proven track record of paying a healthy dividend.
I’m also going to resist the urge to withdraw any dividends received from my ISA.
3. Don’t try to time the market
I’ve sometimes been tempted to buy a stake in a company after a large fall in its share price.
Often the market over-reacts to a piece of news which, although not good, is usually not that bad. The shares then appear to be a bargain. But, this is not always the case and a large drop may be the start of a longer-term decline. It’s important that I stick to my other investment principles, even if a share looks to be a bargain.
This brings me to a broader point.
As an amateur investor, I must accept that I will never be smart enough to purchase shares when they are at the bottom of a cycle, and I will never be brave enough to sell at the top of the market.
4. Think, think, and think again
I must never act in haste.
A few years back, I bought shares in Greatland Gold. It seemed as though everyone was talking about the company, and it was fashionable to invest. But, I didn’t do my research properly.
Although I doubt I will ever get my money back, it’s proved to be a valuable lesson.
5. Accept I might be unlucky
The war in Ukraine has set me back a few months. But, I don’t have a crystal ball so I must stop beating myself up for being unlucky with my timing.
I must remember that investing is for the long term. There will inevitably be some troughs along the way, but I only plan to buy shares in high-quality companies that should ultimately prove to be winners.
Here’s to 2023 …
Hopefully, 2023 will be a better year for my Stocks and Shares ISA. But, with the UK economy already in recession, this is not guaranteed.
However, by sticking to these resolutions, I should be able to weather the worst of the economic downturn.
Happy New Year, everyone!
