(Andrei Tchernov)

By Kristen Fanarakis January 18

January. That time of year when we all resolve to eat better, exercise more and actually stick to our monthly spending budgets. Though your list of resolutions may already be long, make 2015 the year to remedy your bad habits when it comes to savings and investing.

The biggest mistake the majority of us make when it comes to saving and investing is that all simply aren’t doing enough of it. Are you maximizing your 401k savings or only contributing what your employer matches? Have you opened a traditional or Roth IRA? Do you have an emergency fund with three to six months worth of expenses saved?

Take an inventory of your savings accounts, consolidate them where possible and assess whether you are truly saving as much as you can comfortably afford in all of these accounts. Maximizing savings in pre-tax accounts provides the added benefit of lowering your adjusted gross income, thus your total tax bill at the end of the year. Always remember — you are your number one bill.

After taking inventory and maximizing your contributions, the next step is to ensure they are properly diversified and evaluate whether they need to be rebalanced. It is common for people to favor domestic stocks and bonds when investing, a strategy that would have worked to your advantage last year, but over the long-term could hurt your overall portfolio performance.

Consider a portfolio comprising 40 percent domestic equities, 40 percent fixed income and 20 percent international equities, rather than the 60/40 domestic equity/fixed income split many investors use as a benchmark. The 60/40 equity/fixed income split is the simple portfolio diversification strategy that has been around since Harry Markowitz introduced Modern Portfolio Strategy in the 1950s. In the past, investing abroad was either inaccessible or too expensive for the average investor. The wide range of investment choices today enable better diversification to the average investor, which should result in better portfolio performance over time.

Once you determine your optimal portfolio mix, then it’s time to rebalance. Even if you are already invested in a properly diversified benchmark, last year’s strong performance in U.S. equities likely left you overweight relative to your target allocation. On the flip side, if you have a portion of your savings invested in commodities, the 40 percent dive in oil last year has probably left you underweight in this sector. Professional investment managers typically rebalance portfolios to target weights once a month. Most individual investors would benefit from quarterly, or at the very least, bi-annual rebalancing.

The final resolution all investors should vow to make in 2015 is not to let the news, or latest tip on the hottest stock from your brother-in-law or colleague sway you from your investment plan. Invest for the long haul. You might think you are smarter than the average investor, but ample research from both industry professionals and academics support the fact that the average investor typically buys at the highs and sells at the lows. Leave short-term trading to the professionals.

If you can’t resist tinkering with your portfolio, the best thing to do is set up a separate account dedicated solely to short-term or trendy trades. Some advisers say this should be no more than 5-10 percent of your total net worth. A more conservative way to decide how much to allocate is to answer the following question — how much am I willing to lose and not care if it disappeared tomorrow? This number varies widely depending on your personal risk tolerance, market knowledge and the general state of your finances. The right number won’t cost you one minute of lost sleep or cause an ounce of remorse.

Bottom line, to get your portfolio off to a healthy start this year, make sure you are saving as much as possible, try to check your portfolio on a quarterly basis or at least twice a year, and make sure your portfolio aligns with your long-term investment strategy.

Kristen Fanarakis is the assistant director at the Center for Financial Policy at the Robert H. Smith School of Business. Prior to joining the center, she spent more than a decade on Wall Street working in both portfolio management and as a sales trader.

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