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The hardest part about New Year's resolutions is following them. The second-hardest part is just sitting down and writing them. I can't help with the first problem, but maybe I can offer some modest help with the second.

As we wrap up a truly spectacular year in the stock market -- the kind of year that tempts all of us to believe we're geniuses again, just like we thought we were in the late Nineties -- permit me to offer five New Year's resolutions based on the reality that nearly all of us are not geniuses. I believe they'll serve you well no matter who you are or what your situation.

1. I will acknowledge to myself what I'm doing. Do you like to pick individual stocks? How about jumping into and out of positions day by day or even minute by minute? Nothing is necessarily wrong with these practices as long as you're realistic about what you're doing. As you know but probably prefer not to dwell on, research shows overwhelmingly and consistently that you stand almost no chance of beating the market by picking individual stocks, and if you do beat it, the reason will be pure luck. That doesn't mean you shouldn't pick stocks. But remember what Burton Malkiel (author of A Random Walk Down Wall Street) told me on the program: He picks stocks in a very small portion of his portfolio because it's fun. He's honest with himself about what he's doing.

   And if you really believe you're the next Warren Buffett? Well, okay, but just remember what he says about the market: He doesn't even pretend to know what the market will do in the next six months or year or two years. So if you're a short-term trader, acknowledge that you're really just pulling the lever on a slot machine, though you can do it from your den rather than in a casino.

2. I will diversify. You've heard it a million times, but in the past couple of years we've been reminded of an often overlooked reason to diversify: It's virtually impossible to spot scandals in advance. Enron, WorldCom, HealthSouth, now Parmalat -- investors engaged in lively debates about their valuations, but I never heard a syllable suggesting they were massive frauds, at least not until it was too late. The lesson comes home again: Making big bets on individual companies is extraordinarily dangerous.

   Remember that diversification means more than just owning a wide range of U.S. stocks. It means owning stakes in all asset classes, including bonds and real estate, and owning assets in non-U.S. markets. Diversifying this broadly is easier than ever, thanks to a wide range of index funds.

3. I will remember that return on capital is what it's all about. Companies tell us about their performance by all kinds of measures, and most of them are marginally useful, or useless, or outright misleading. Earnings per share and EBITDA (earnings before interest, taxes, depreciation, and amortization) are the favorites these days. Ignore them (especially EBITDA). The capital markets care about a company's return on capital, and the extent to which it exceeds cost of capital -- or more precisely, about what these measures are likely to look like in the future. Which lead us to…
4. I will look forward, not backward. One of the most pervasive and misguided habits of investors large and small is putting their money into investments that have performed well rather than into those that are likely to perform well. We see it yet again right now: Investors pouring money into stocks now that they're gone up substantially, while they yanked money out of the market back when prices were much lower and we all should have been buying. This is one of the most difficult and most important habits to break.
5. I will be realistic about results. We all love to fantasize about the big score. Nothing wrong with that -- until you start investing as if the fantasy were real. Being realistic starts with a clear-eyed view of how much money you'll need when, then a plan for how to get there based on reasonable assumptions. That means not assuming you're going to earn 20% a year, even though plugging that figure into the retirement calculator makes everything come out okay. And don't assume your returns will be nice and even year by year. They won't be.

There we go: Five New Year's resolutions that I suspect will benefit any investor. But as I said, listing them is not the hardest part. Following them is. Now -- onward to that.

I wish you the happiest, healthiest, and most fortunate of New Years.