Ten financial goals for the retail investor in 2023

In the words of Ismael García Puente, fund manager and selector of MAPFRE Gestión Patrimonial, we live in a new economic paradigm that also goes along with the well-known “calendar effect” that every year makes the markets fluctuate during the last few months of one year and the first few months of the next. The year 2023 has surprised even the gurus. The forecasts do not seem negative and it is possible that the context is not only no longer adverse, but positive for investors.

At this time of the year, it is always interesting to reflect, analyze results and, perhaps, launch new proposals, and investing is a good way to manage your assets and thus fight against inflation, which can reduce your assets and thus not lose purchasing power, while keeping alive the possibility of future profitability.

But investing requires a series of prior steps and advice to do so in a safe and informed manner.

Ten resolutions you can make this 2023 to start, or get better, as an investor

1. Discover and define your investor profile

Maybe this is something you already know if it’s not the first time you’ve decided to invest. But it’s always a good time to review your profile and see how it has evolved or changed depending on factors such as your savings capacity, family situation, geopolitical aspects and other intrinsic and extrinsic elements that may change both your capacity and our willingness to invest.

As always, this profile will also be defined both by your capacity for risk or risk aversion and by the returns you wish to achieve. Both factors will allow you to see whether you have a conservative, moderate or aggressive profile and to set your objectives and strategy accordingly. This will be your starting point.

2. Set a budget and be realistic

Making use of only the money you don't need in the short term seems the most careful and realistic approach when it comes to investing. No matter how conservative your profile is, or the products in which you invest, there is always a degree of risk.

You must be ready to lose part of the investment and this should not be a problem in the short term, so you must establish a realistic budget that takes into account these risk variables that you cannot control one hundred percent.

Furthermore, once you have set the budget you are able to allocate to the investment, you have to be realistic with the results you expect and have a clear idea of the profit options in relation to our total investment. 

3. Learn and train continuously

A context such as that of an investor requires being always up to date, analyzing trends and learning continuously. And this relates not only to economic matters and market trends, but also about the general current affairs in aspects that may have an impact on the markets.

You can listen to podcasts on economic and financial news like Economics Café, or read current news and in-depth reports, such as the ones you'll find at Zoom- Economía, where we pay special attention to financial education, or MAPFRE am.

4. Set objectives, strategy and timing

Different types of objectives open up to you when you decide to invest. Some of these objectives will be short term, such as paying off overdrafts or debts, or saving for a vacation on the other side of the world. Others will be medium and long term, such as building a savings fund for retirement, buying a home or having funds available to pay for children's college education.

Once you’ve set your objectives, how are we going to achieve them? This is where you define your strategy with the actions you want to take, what steps to follow, the investments (type, objective and funds) and, of course, the timing.

5. Try to maintain regular savings and investments

As a general rule, the recommendation is to always maintainsavings equal to between six and nine months of fixed expenses. This will allow you to respond more calmly to any negative eventuality. In addition, maintaining this liquidity buffer will allow you to maintain regular contributions to funds focused on long-term objectives, such as a pension fund, even in situations of greater uncertainty.

Getting into the habit of saving and investing on a regular and constant basis, with a vision that goes beyond the short term, is also an effective tool to avoid falling into market fluctuations and the risk of entering at unfavorable times.

6. Diversify your investments

Diversifying investments in different types of assets, with a variety of time horizons, risks, etc. is the best strategy to control and reduce risk.

You shouldn’t bet everything on a single card and you can elude somewhat the effects of any volatility in the stock market by investing in different sectors or funds.

7. Discover new options and alternatives

If you are a seasoned investor or have experience, you should explore options beyond what is most well known when considering your investments.

In general, the emergence of digital brokers, and the diversification of available sectors and assets makes diversified investment a very attractive option, as we have mentioned. However, as you will see below, it is important to invest only in what you know and that has a solid foundation.  

8. Develop a contingency plan

The economic context can be fickle and in constant flux. So, when investing, as noted above, it is impossible to have zero risk certainty. With this in mind, it is a good idea to have a contingency plan that allows you to respond quickly and adapt to a new situation that may arise.

This plan will include measures and actions to be taken, and this will be possible thanks to the savings you’ve set up in advance. Take into account prevention measures to try to avoid potential threats, emergency measures to mitigate the negative effects in case they do occur and recovery measures to return to a state of normality.

9. Follow up with discipline and control of emotions

The effect of the pandemic of recent years on the stock market allowed us to see how thousands of small investors withdrew their funds due to fear and hasty decisions, which led them to miss out on the effect and benefit of subsequent rallies.

Monitoring the performance of your investments is certainly necessary. But it must be done with the proper discipline, taking into account the investment and loss objectives and capacities that you have set for yourself, and not allowing yourself to be carried away by moments of euphoria or fear.

10. Ignore fads without a solid basis

The year 2023 has begun with new news of “meme stocks,” as was the case with GameStop shares in 2021. That is, stock market valuations that skyrocket in defiance of all logic and reason due to the effect of viral actions on social networks such as Reddit, 4Chan and others.

This also happened in the past and continues to happen in other types of investments, such as some cryptocurrencies, blockchain-based solutions or NFT. In general, you should aim to invest only in what you know in depth or in things that have a sufficiently solid base to generate the necessary confidence to fit in with your plans, strategy and objectives.

As a final point of these resolutions for 2023, and which combines the ten previous ones, we recommend seeking advice from professionals and regulated brokers who can help you define your investment profile, your objectives and help you select investments that best fit these. This is how you can face 2023 with the best assurance of making your investments a useful and secure financial tool.