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