Many people make resolutions with each New Year, with mixed results. Often the resolution ritual is as far as the effort goes. Before jumping to conclusions, try taking a hard look at your investment activities and see if you recognize any of these patterns of behavior.

Avoiding the taxman – The tax tail can wag the investing dog in many ways, and none more damaging than not taking gains because there would be taxes due. The entire point of investing is to buy low, sell high and reap gains over time. Many investors fail to adequately diversify or take advantage of well-performing assets simply to avoid taxes, and their portfolios invariably suffer when that asset loses value. Yes, it usually makes sense to take long-term rather than short-term gains, especially with the current rates. But the rule of thumb with taxable investments is to make decisions based on economic and portfolio management principles first and taxes a distant second.

Winners only – A portfolio of the best performing mutual funds of the last two years, or of stocks which have appreciated well over the past year, is usually doomed to underperform in the future. Likewise, simply keeping the strong performers in a portfolio and selling everything else is a sure way to lock in both current and future losses. This losing strategy is commonly known as “chasing performance”. One of the basic theories of investing is regression to the mean, which simply means that over the long term stocks and funds well gravitate towards average performance for their category. Buying securities after they have appreciated increases the risk that they will fade back to the pack.

All action, all the time – I am often asked by clients whether they should sell a certain fund/stock/investment because “it really hasn’t done anything in the past year”. Except for the most aggressive investors, a good portion of a portfolio should look like it’s not doing anything; particularly through reinvestment, it will likely grow steadily over the long term. As with the winners only strategy, always looking for action merely adds volatility, which increases risk without commensurate higher returns.

The OC – No, not the show on Fox, but the constant restless fidgeting with a portfolio. Obsessive investors are compelled to react to every news item, every hot trend, every investing technique in the financial media without any consideration of whether it makes sense for them. Even worse, this obsession feeds on itself when haphazard investments don’t pan out and the need for the next great idea becomes more urgent.

Head in the sand – Putting a portfolio in place and never looking at it for years, either from lack of interest and understanding or because the strategy is “sound”, is the opposite of The OC. I don’t know anyone that hasn’t had their life circumstances change over the course of a few years, or at least had improved information or clearer goals that should be considered in a portfolio. And the economic and investment environment certainly changes over time. Even if changes are minor or infrequent, it is critical to keep your investment approach current with your objectives and risk tolerance.

Bottoms up – If I were furnishing my house and just bought pieces I found attractive or interesting, I would likely end up with furniture that didn’t fit the rooms or the function of the house. The same is true of investing; a collection of investments that were selected randomly or on a whim has no direction and is entirely unpredictable. (There is a valid stock theory referred to as “random walk” which holds that randomly selected stocks will perform as well as carefully screened stocks, but that’s a different issue.) Worse yet, it is likely that the random collection of investments would share many similar characteristics due to some subconscious preference, which greatly amplifies risk.

The safety net -Relying on someone else to take care of your financial needs, like family, a company pension or government programs, is not necessarily a critical error. But in these times, these safety nets are not necessarily guaranteed and can fall short of expectations – witness the current debate on Social Security, grossly underfunded company pension plans and rapidly changing family fortunes. Think about professions which actually rely on a safety net, like circus performers or high metal workers. While the safety net provides a certain sense of security, these people are very concerned when they have to use the net, because that means that something has gone wrong or they have not performed properly. Better to consider these options as part, but not all, of your plans.

Fortunately there is a simple antidote to all these afflictions. Develop an overall plan that considers risk and return, your objectives, your resources and your disposition. Make conscious, informed decisions about your financial life rather than wild guesses. Review the plan on a regular basis to make sure it is still consistent with your situation.

The beauty of having a framework on which to rely is that it does not preclude individual preferences or techniques. It can incorporate all the behaviors discussed in this article, but in the context of a thought-out plan these behaviors can be constructive rather than dangerous. Buy and hold, keeping winners, short-term trading and random security selection can all work if done in the context of an overall plan. The fundamentals of investing are really not that complex, and are most effective as a reflection of the individual investor.