Crafting a sensible strategy that's right for you is a lot easier than you might think —— if you just follow these commonsense moves.
Investing is starting to get interesting again. While the 9% gain for the S&P 500-stock index in 2004 may not look that exciting, it represents a 14% jump from where the benchmark was in mid-August and is a major improvement over the flat-to-down markets of the prior nine months of the year. Combined with the generally positive consensus outlook among investment strategists on Wall Street for 2005, the recent lift is enough to get investors calling their brokers again.
Indeed, Charles Schwab（SCH ）reported on Dec. 14 that trading volume was up 25% in November over October. On Dec. 30 the Investment Company Institute, a mutual-fund industry trade group, reported that investors poured a net $21 billion into stock funds in November, compared with $7 billion in net inflows in October. That may have been just the start.
The new year period is a great time to put some new money to work in the market——the fact that so many people often do so is one of the main reasons stocks tend to go up in January. But rather than rush headlong into the hot stock of the day, a more methodical approach is best. Whether it's for your 401（k）or your kids' college-savings program, here's a simple Five Step Plan for figuring out where to put your money in 2005:
Step 1: Forget about the market outlook. You read all those stories（including in BusinessWeek）forecasting the direction of the economy and quoting strategists on the exact level the S&P will reach by yearend? Now just ignore them. The problem with such forecasts is that they're only as good as the next six months —— if that —— so they aren't much help when it comes to implementing a longer-term investing strategy.