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By Jason Stipp | 12-30-2011 10:00 AM

Five Resolutions for Investors

Investors should resolve to tune out the political news, buckle up for more volatility, be wary of IPO hype, and not stretch for yield, says Morningstar markets editor Jeremy Glaser.

Jason Stipp: I'm Jason Stipp from Morningstar, and welcome to the Friday Five.

In case you haven’t started your New Year's resolution making yet, Morningstar markets editor Jeremy Glaser is joining me today with a short list to get you going. Thanks for being here, Jeremy.

Jeremy Glaser: Happy New Year, Jason.

Stipp: So what do you have for the Friday Five this week?

Glaser: This week we are going to take a look at some resolutions like ignoring political rhetoric, carefully checking your asset allocation, avoiding Facebook, being careful with alternatives, and finally, don't stretch for yield.

Stipp: So that first one, ignoring political rhetoric, sounds a little bit easier said than done. Why is this important for investors?

Glaser: It certainly is. I realize that with the incredible amount of information that’s going to come out over the course of this presidential campaign for the next year, it's difficult to completely close your ears and just not listen to it and stay focused on your long-term goals. But I think it's important to do that.

We are going to hear so many different proposals from so many different candidates on the Republican side, from whoever eventually emerges as the nominee, and from President Obama during the campaign. There is just going to be a lot of information about different plans they want to enact. How they want change the tax code. How they want to change different incentives. But the truth is that a lot of these probably won't happen. We won't actually know what anyone is capable of doing until after the election.

And trying to adjust your portfolio during the year based on "well the dividend tax rate may go up a little bit here, may go down a little bit here, capital gains tax is going to change here" is an absolutely impossible task.

And instead of trying to worry about staying ahead of any potential tax changes, waiting until these tax changes look a little bit more concrete, and then making those concrete changes to portfolio, I think is a much more prudent path. And I think it’s a good idea to kind of close your ears a a little bit to that rhetoric that’s going to be coming from both sides of the aisle.

Stipp: Resolution number two: Carefully examine your asset allocation. What things might you find when you crack open your portfolio, and why should you resolve to make sure that it's in line with your plans?

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