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Make 2011 Your Best Year Ever

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In many investors' eyes, 2010 has been a return to normal for their portfolios. After the debacle of 2008 and the big bounce of 2009, this year has given most investors an almost perfect year: good sized double-digit returns on stocks without the huge volatility that recent years have stuck investors with.

As much of a relief as that is for shell-shocked shareholders, you may still not be happy with your overall returns. The end of the year is a great time to take stock of your current financial situation and to review your investments to make sure that you're getting the most out of your investment strategy and maximizing your potential returns going forward.

Winners and losers of 2010
If all you pay attention to are the big market indexes like the Dow and S&P, you may figure that nearly everyone was a happy camper this year with their stocks. Gains this year have been fairly broad-based, with small caps and mid caps joining their larger counterparts in posting rising share prices during 2010.

But despite the overall favorable environment, there are still haves and have-nots among stocks. For instance, soaring silver prices continued to push prices of Silver Wheaton (NYSE: SLW  ) , Hecla Mining (NYSE: HL  ) , and other silver-related stocks strongly higher even after 2009's big gains. Similarly, industrial stocks even saw their gains accelerate from 2009 levels, as equipment makers Caterpillar (NYSE: CAT  ) and Deere (NYSE: DE  ) both benefited from rising construction and agricultural activity to post even larger gains than they did a year ago.

On the other side of the equation, Europe faced many of the same troubles that U.S. stocks did in 2008 and early 2009, depressing stocks across the continent. It's not surprising that National Bank of Greece (NYSE: NBG  ) and Allied Irish Banks (NYSE: AIB  ) , which remain at the epicenter of the European sovereign debt crisis, posted huge losses. But collateral damage even held back shares of companies that you might have expected to do better, such as steel giant ArcelorMittal (NYSE: MT  ) and dividend king France Telecom.

Don't give up
If your investing strategy didn't work as well as you'd hoped this year, don't lose hope. As hard as it is to suffer through a year of underperformance, long-term investors understand that a single year doesn't reverse a lifetime of sound, prudent investing. Sure, you'd love to have gotten into every stock you buy at the perfect moment, but you also have to deal with the inevitable situations in which you buy the right stock at the wrong time and have to suffer through long down periods before finally seeing positive returns.

All that said, even if you're comfortable with your investments this year, there are always steps you can take to improve your results going forward. In particular, take a look at the investing decisions you've made this year and make sure you haven't made any common mistakes.

Some of the most common mistakes can also be the most damaging. For instance, even the most calm and rational investors can sometimes give in to emotional situations, and often when they do, it proves to be the worst thing they can do. If you've had to struggle against your emotions this year, take a close look at the risk level in your portfolio and make sure you're comfortable with it.

In addition, if you've picked stocks or other investments solely because they've performed well in the past, don't deceive yourself into thinking that you're an investing genius. You may get lucky following the herd for a while, but you don't want to be the last one standing when the music stops, or else you could find yourself holding next year's biggest losing stock.

You have time
Fortunately, long-term investors have plenty of opportunities to learn from their mistakes and improve their results going forward. Making mistakes is part of learning to become a better investor, so rather than beating yourself up over your inevitable miscues, resolve to find the lesson from each of them and do your best to avoid repeating them in the future. If you have the discipline and determination, you can ensure that 2011 will be an even better year for your investments than 2010 was.

Make 2011 the year that you save your retirement. For tips on how to get it done, click here and read the Fool's new special report, The 7 Secrets to Salvage Your Retirement Today.

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance.

Fool contributor Dan Caplinger expects some great things from 2011. He doesn't own shares of the companies mentioned in this article. France Telecom is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. It doesn't get any better than the Fool's disclosure policy.


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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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