Being a successful investor means different things to different people.  It may mean paying for educations and weddings for children or grandchildren, giving back to your community or church, a dignified retirement or even leaving a meaningful legacy.  It is usually not an accident but the result of a number of factors.  Those factors include proper diversification, periodic rebalancing, avoiding unnecessary risk, reducing fees and expenses and minimizing taxes.  However, the single biggest variable that will determine the likelihood of you attaining your life’s goals is none of those things.  It is your ability to save more than you spend and then invest those savings prudently over a long period of time and to do so in the context of a carefully constructed plan.  

Your portfolio’s performance will not be the major determinate of your future nest egg’s value. It is instead, the amount of money you contribute to that portfolio over time.  Your rate of return is important (as are low costs, reduced taxes, etc.) but if you are unable to fund your goals it will almost certainly be due to your lack of adequate savings rather than your account’s performance.  Many people have insufficient financial resources in retirement, not because they didn’t make enough money or earn a high enough return on their investments, but rather, because they never developed the financial discipline of saving.

As we start a new year, if there is one thing you could do to increase your probability of being able to achieve your life’s goals, my advice would be to make a resolution to determine how much you should be saving.  Sit down with your financial advisor and have a discussion about your savings rate rather than trying to determine which stock, mutual fund or investment strategy might be this year’s winner.  Once you know how much you should be saving then you can start moving in that direction. It could be as simple as making a commitment to increase your 401(k) deferral by 1% every year or re-financing high-cost debt and reinvesting the savings. That is one New Year’s resolution which I guarantee will pay big dividends.