Investing in 2007 was not for the feint of heart.  Just ask Bear Stearns.  Or Crocs.  As for me, I think this year can best be summarized in one, simple word: confusing, volatile, and fickle…and, of course, wildly profitable. 

OK, perhaps 2007 is not so easy for me to cleverly encapsulate in one pithy phrase but it sure was quite a roller coaster ride. Just ask E*Trade shareholders who are still being whip-sawed as the year comes to a close.  Add in the Subprime Mortgage Crisis, foreign governments and banks taking stakes in our largest financial institutions, Jim Cramer’s wig-out on CNBC, and an upcoming Presidential election and you have the ingredients for one potent cocktail.   

The year-end is a perfect opportunity to shrug off that tax-loss from the Chinese solar company you bought or the bio-tech stock you were convinced was about-to-get-FDA-approval-any-day-but-ran-into-problems, and reassess your portfolio.  And don’t worry, you can be assured your broker and/or advisor will have plenty of Monday-Morning Quarterbacking for you.  But we do things a little differently at Cake Financial- we tell you what others won’t. 

So no matter how your investments performed in 2007, we at Cake have some investing tips to help ensure you are well positioned in 2008:

1.    Don’t Trade So Much.  Trading too often is the number one killer of good investment performance, jeopardizing returns because the fees and capital gains incurred reduce profits. On the flip side, many investors hold on to waning stocks for too long rather than taking the hit, using it as a tax loss and re-investing.  The best way to avoid both scenarios is to have an asset allocation plan, check yourself against other investors and key market indices before your buy or sell to be sure you’re making intelligent investing decisions. 

2.    Don’t Forget Your Past.  Taking a historical look at your investments – successes AND failures – is a great way to refine your strategy for the coming year. Reviewing investment history can provide important context about how your portfolio has performed over time, mistakes you might be repeating, and lend insight into ways you might alter investment habits to reap greater returns. 

3.    Don’t Just Talk to Chuck.  When it comes to your hard earned money, it’s important not to rely on just one or two people for advice, but to tap into multiple, proven parties for guidance. So, talk to Chuck….as well as Bobby, Suzy, Pam, Steve and other trusted friends and family who are performing well in the market, to compare strategies and get valuable insights. A proven network of investors can help you validate the investments you’re making.

4.    Do Talk About Your Money. It’s been a long-time etiquette faux pas to talk about your money. But, when it comes to investing, you don’t want to be caught in the dark. So, this year open-up about your investing; talk to others about their approach and don’t be shy about sharing yours. Doing so may lead you to important information that can change your outlook – and returns – for the long run.

5.    Do Challenge Your Advisor. If you entrust your financial health to an investment advisor, don’t be afraid to ask him/her to share information about their investment performance. Those reports you get in the mail? Well they don’t tell the whole story. Don’t follow the advice of someone who isn’t investing successfully. It’s easy to check their results at Cake by viewing your investments and those of your advisors side-by-side. 

Want more?  Listen in to what some individual investors we recently met are saying.  Would love to hear your ideas, too, so please post don’t be shy with your comments.

Best wishes for a new year full of steady portfolio gains.  See you on Cake.

Happy Holidays.

Steve

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