As the year draws to a close, it’s a practical time to review your investment strategy. A year-end review can offer insight into how well your current investments align with your financial goals, taking into account recent changes in the market and any shifts in your personal priorities. This annual check-in can highlight areas for potential adjustment and improvement as you look toward the year ahead. With tax season approaching, assessing your investments now can also bring to light tax-efficient strategies that may apply to your situation. 

Assess Your Investment Goals 

Start by revisiting your current financial goals to see how they align with your investment strategy. It’s helpful to categorize your objectives as short-term, mid-term, or long-term, as each may require a different approach in terms of risk tolerance and asset allocation. 

Consider whether any recent changes in your life—such as a job change, new family commitments, or retirement plans—have shifted your financial priorities. If so, it might be worthwhile to adjust your investment strategy to reflect these updates, helping it stay aligned with your broader goals and timeline. Reviewing your goals periodically helps keep your investments on track and responsive to any changes in your personal or financial situation. 

Evaluate Your Portfolio’s Performance 

Take a close look at how your portfolio has performed over the past year by examining both individual assets and the portfolio as a whole. Start by assessing whether each investment has met its intended role in your strategy, such as providing growth, income, or stability. Comparing the performance of individual assets against relevant benchmarks can help you understand how each is contributing to your goals and where potential improvements may be needed. 

If you identify underperforming assets, consider whether these are temporary dips due to market fluctuations or more significant, ongoing trends. It’s essential to avoid overreacting to short-term volatility, which is common in most portfolios. Instead, focus on assets that consistently fall short, as these may need to be adjusted or replaced. This balanced approach helps keep your portfolio aligned with your objectives while minimizing unnecessary turnover. 

Reassess Your Risk Tolerance 

Your risk tolerance isn’t fixed; it can evolve over time based on factors like life stage, financial goals, and changes in the broader market outlook. Take a moment to reevaluate how comfortable you are with the level of risk in your current portfolio. Major life events, shifts in income, or approaching retirement can all influence how much risk you’re willing to take on in your investments. 

If you find that your risk appetite has changed, consider adjusting your asset allocation to better reflect your current comfort level and priorities. For instance, those nearing retirement may prefer a more conservative allocation to help preserve capital, while those with longer horizons might feel comfortable with a higher proportion of growth-oriented assets. Reassessing your risk tolerance periodically helps keep your strategy aligned with both your personal and financial situation. 

Consider Tax-Efficient Strategies 

The end of the year is a strategic time to explore tax-efficient moves that may benefit your portfolio. Start by reviewing opportunities for tax-loss harvesting, which involves selling investments that have decreased in value to offset gains elsewhere in your portfolio. This approach can help manage your overall tax liability while allowing for future growth potential. 

For some investors, a Roth conversion might also be beneficial. Converting traditional retirement assets to a Roth IRA can lead to tax-free growth and withdrawals in the future, though it’s essential to evaluate whether this aligns with your current tax situation and long-term plans. 

Finally, check that you’ve made the maximum contributions to any tax-advantaged accounts, such as IRAs or 401(k)s. Maximizing contributions before the year’s end can add valuable tax-deferred or tax-free growth potential to your retirement savings. These strategies can offer meaningful tax benefits and help position your portfolio for the coming year. 

Check for Changes in Asset Allocation 

Over the course of the year, market performance can cause certain asset classes to grow disproportionately, leading your portfolio away from its original target allocation. Assess your current asset mix to see if it still aligns with your intended allocation and overall strategy. 

If you find that some asset classes are now over- or underrepresented, it may be time to rebalance. Rebalancing involves adjusting your holdings to return to your target allocation, which helps maintain your desired level of risk and return potential. 

Staying diversified across a balanced mix of assets—such as stocks, bonds, and alternative investments—can reduce the impact of market volatility and provide more stable growth. Regularly reviewing and rebalancing your allocation helps keep your portfolio aligned with your investment goals and risk tolerance. 

Review Fees and Costs 

Fees and costs can quietly erode your investment returns over time, making it essential to periodically review the expenses associated with your portfolio. Take a close look at various costs, such as expense ratios on mutual funds or ETFs, management fees, and transaction costs. These fees, though often small on a per-transaction basis, can add up significantly over the years and impact the long-term growth of your portfolio. 

High fees may reduce your net returns, especially when compounded over a long investment horizon. If you find that certain investments or accounts carry excessive costs, consider whether there are lower-cost alternatives that still align with your goals. Index funds, for instance, tend to have lower expense ratios than actively managed funds. Keeping fees in check is a straightforward way to potentially improve your portfolio’s efficiency and enhance its overall growth potential. 

Update Your Estate Plan and Beneficiary Designations 

A year-end review is also a good time to check that your investment accounts align with your current estate plan. Keeping your estate plan up to date provides clarity and direction for the future distribution of your assets. 

Begin by confirming that beneficiary designations on retirement accounts, life insurance policies, and other financial accounts reflect your current wishes. Significant life events—such as marriage, divorce, the birth of a child, or the passing of a loved one—can make previous designations outdated. Updating these details not only represents your current intentions but can also help streamline the transfer process and minimize potential complications for your loved ones. Regularly reviewing your estate plan and beneficiary designations is a simple yet impactful step toward reaching your financial goals. 

Revisit Your Financial Plan and Consult a Professional 

As you assess your investment strategy, take a step back to consider how it fits within your broader financial plan. Aligning your investments with your overall financial objectives—such as retirement, education funding, or charitable giving—can help keep you on track toward achieving these long-term goals. 

For more complex investment or tax strategies, consider consulting a financial professional. An advisor can offer valuable insights into tax-efficient strategies, asset allocation, and potential adjustments that fit your specific needs. This collaborative approach provides a fresh perspective and allows you to adapt your financial plan to reflect any changes in your goals, market conditions, or tax regulations. 

Conclusion

If you’d like extra guidance on keeping your finances balanced during the holidays—and beyond—consider working with a financial professional. They can help you set spending priorities, develop a budget that supports your goals, and even create a broader financial plan for the upcoming year. With the right support, sticking to a holiday budget becomes easier, allowing you to enjoy the season fully and start the new year on solid financial ground. 

Standard Disclosure 

This blog expresses the author’s views as of the date indicated, are subject to change without notice, and may not be updated.  The information contained within is believed to be from reliable sources.  However, its accurateness, completeness, and the opinions based thereon by the author are not guaranteed – no responsibility is assumed for omissions or errors.  This blog aims to expose you to ideas and financial vehicles that may help you work towards your financial goals. No promises or guarantees are made that you will accomplish such goals.  

Past performance is no guarantee of future results, and any expected returns or hypothetical projections may not reflect actual future performance or outcomes. All investments involve risk and may lose money. Nothing in this document should be construed as investment, tax, financial, accounting, or legal advice. Each prospective investor must evaluate and investigate any investments considered or any investment strategies or recommendations described herein (including the risks and merits thereof), seek professional advice for their particular circumstances, and inform themselves about the tax or other consequences of any investments or services considered.   

Investment advisory services are offered through Liberty Wealth Management, LLC (“LWM”), DBA Liberty Group, an SEC-registered investment adviser.  For additional information on LWM or its investment professionals, please visit www.adviserinfo.sec.gov  or contact us directly at 411 30th Street, 2nd Floor, Oakland, CA  94609, T: 510-658-1880, F: 510-658-1886,  www.libertygroupllc.com. Registration with the U.S. Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training.