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The First Thing You Should Do in 2011

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For two years running, stock investors have had smiles on their faces. But looking forward, if you've made a resolution to keep earning strong investment returns year after year, you don't want to take big gains for granted. In order to keep improving your investing results in 2011 and beyond, you don't want to waste any time as the new year gets under way.

In past years, I've tried to answer the question of what your first move should be as a new year begins. Yet while the investment environment looks much different from how it looked at the beginning of 2009, I still think the biggest enemy of investors is procrastination. As hard as it can be to get a jump on important things like saving for retirement, it's crucial to put yourself in position to make smart investments whenever the opportunity arises -- and that means opening and funding an IRA as soon as you can.

Catching up
Fortunately in this case, the Internal Revenue Service actually gives you some time to procrastinate. You have until April 15 to make an IRA contribution for 2010. So if you haven't done so yet, getting money into an IRA for 2010 is definitely worth doing, whether you need to open an IRA or already have one where you can deposit additional money.

But if saving for retirement is truly a priority -- and it definitely should be -- then thinking about the last moment you can set money aside isn't the ideal approach. Rather, the key fact you should focus on is that today is the first business day you can make IRA contributions for 2011. If you get your money in now, rather than waiting until next year to think about a 2011 IRA contribution, you'll not only enjoy tax-deferred growth for as much as 15 extra months, but also give yourself a chance to take advantage of great investments that might otherwise have passed you by.

Waiting will cost you
In a rising stock market, missing out on a year or more of gains can be extremely costly. Just think about the progress that a company can make in a single year:

  • At the end of 2009, Netflix (Nasdaq: NFLX  ) traded for less than $60 per share after having more than doubled in the previous year. Despite some concerns about valuation, though, the company has essentially vanquished Blockbuster, and it gave shareholders even greater gains in 2010.
  • In late 2009, Sirius XM Radio (Nasdaq: SIRI  ) had just managed to reverse a subscriber exodus that threatened its very existence. Now, it has Howard Stern locked in for another five years -- and its shares have tripled.
  • This time last year, silver miners Hecla Mining (NYSE: HL  ) and Coeur d'Alene Mines (NYSE: CDE  ) had already enjoyed a strong year for silver prices. But despite their big gains in 2009, they had plenty more room to run last year, rewarding investors who picked up shares early in 2010.

Now, it's true that sometimes procrastination can end up saving you. Certainly investors may have felt that way in 2008, when waiting to invest in stocks would've saved you from big losses.

But even if you avoid individual stocks and stick with an asset allocation strategy using broad-based index exchange-traded funds, the stock market's general upward trend over time has made it so that you've been better off getting your money in sooner than later. Looking at three broad-based ETFs covering the entire world of stocks -- Vanguard Total Stock Market (NYSE: VTI  ) , SPDR S&P World ex-U.S. (NYSE: GWL  ) , and iShares MSCI Emerging Market (NYSE: EEM  ) -- buyers at the beginning of the year were rewarded by paying far less than procrastinators will have to pay now.

Getting it done
Making more money is a great motivator to make an IRA contribution now, but it's not the only reason. If you contribute early, you don't have to worry about trying to sneak in under the wire when April comes. It also gives you time to come up with a full $5,000 contribution -- $6,000 if you're age 50 or older -- that would let you max out your IRA for the year.

Given how easy it is to open an IRA, even not having an account available isn't a good excuse. Don't wait another minute -- get 2011 started right by contributing to a retirement account, and you'll have taken the first step toward a successful new year.

An IRA is a great way to start working on saving for retirement. Learn more useful tips by clicking here to 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 likes checking things off his list early. He owns shares of the iShares MSCI Emerging Market ETF. Netflix is a Motley Fool Stock Advisor pick. 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. The Fool's disclosure policy always gets it done right.

Read/Post Comments (10) | Recommend This Article (25)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 03, 2011, at 4:18 PM, pete163 wrote:

    The First Thing You Should Do in 2011 is BUY as much of Sirius XM stock as possible, and then BUY some more. Stay Long Sirius XM and Kill the Shorts

  • Report this Comment On January 03, 2011, at 8:18 PM, samedge wrote:

    I'm a long-term cynic of Sirius XM and I've finally slowed down to analyze my stance and understand why - radio, satellite or broadcast, are dying mediums.

    According to Edison Research: Between 2000-2010, radio use by young adults and teens declined by almost FIFTY percent (see here: Aside from the inclusion of younger teens, This is the most desirable demographic for any marketer and these are pretty dooming numbers for radio.

    How can an individual investor look at the future for the platform of this business and consciously pour a few thousand dollars into it (let alone the crushing debt-load)? Within 10 years, radio (and conventional media for that matter) will be little more than a novelty and I'd discourage anyone from buying SIRI.

  • Report this Comment On January 03, 2011, at 9:54 PM, hbofbyu wrote:

    Siri is just FM radio made pretty. Unless they radically change their business model, Siri is a dog and waaaay overpriced.

  • Report this Comment On January 03, 2011, at 11:50 PM, FlorisHJ wrote:

    @samedge the young adult/teen age group is not the one buying new cars with SIRI radios already installed - after a period of free quality signal wherever you drive (no searching for signals as you drive cross country) the more affluent are quickly hooked and don't mind paying the subscription.That is the demographic, and the business model... And I for one am betting it is going to be successful over the next five years. But it would not be my recommendation for the first 10 stocks in a portfolio (for me SIRI is about 1% of a portfolio of about 25 stocks).

    The bigger message though is "fund your retirement account early, and take full advantage of tax law and compounding" - and I am sure we can all agree on that. Of course 5000 per year is not enough to get you to comfortable retirement unless you start very young (even more important than funding early in the year - get an IRA before you get a car with SIRI !!).

  • Report this Comment On January 04, 2011, at 6:34 AM, pete163 wrote:

    All the loser's and drum beaters out there are going to get left behind and the shorts on Sirius XM are going to pure blood of $$$$ CASH $$$$ when it hit's in the next two week's. I love watching shorts get crushed, I really do!

  • Report this Comment On January 04, 2011, at 7:44 PM, samedge wrote:

    @FlorisHJ: On your first comment - that is exactly my point. In ten years, all the current teens and young adults WILL be owning the new cars.

    You're also correct in that the radios will be pre-installed, but the analysis suggests that NONE of them will be listening to them. And if 50% less stopped listening to the radio in the last decade - what makes you think those statistics will reverse their course by 2020? If not, will these folks be willing to maintain a subscription for a service they don't utilize?

    Disclosure - I am neither long nor short of SIRI and sleep better because of it.

  • Report this Comment On January 05, 2011, at 6:35 AM, Johnexo wrote:

    Investing is so very important to protect yourself from inflation. But be careful as you are investing nothing but money and in any circumstances, you don't want to loose it.

    <a href=" finance investing</a>

  • Report this Comment On January 05, 2011, at 6:35 AM, Johnexo wrote:

    One of the important element from the Personal Finance aspect is Investment. Without investment, you will gain no profit and suffer from high inflation rates which contribute a big portion of failure in your financial status.

  • Report this Comment On January 06, 2011, at 12:11 PM, tomd728 wrote:

    Buy constant free cash flow providers with litlle or no debt..........throw in some tech you can understand.

    SIRI is a dog with fleas.


  • Report this Comment On January 07, 2011, at 10:51 PM, mike2153 wrote:

    If Howard Stern is your primary selling point, you better be a really, really good salesman.

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