As the year begins to wind down and fall sets in, it’s a great time to take a closer look at your investment portfolio. With the hustle and bustle of the holiday season approaching, fall presents a quieter window to assess, adjust, and prepare your financial strategy for the year’s end and beyond. A thorough review of your portfolio can help you make informed decisions that could benefit your overall financial plan as you move into the new year. Here’s a guide on how to conduct a fall portfolio clean-up and get your investments in shape for the year’s final quarter.
- Revisit Your Financial Goals
A fall portfolio clean-up starts with reviewing your financial goals. Are they still relevant to your current life circumstances? Personal and financial priorities may have shifted since you set your goals, so it’s important to evaluate whether your portfolio is still aligned with them.
For example, if you were saving for a large purchase, such as a home or car, and that goal has changed, it may be time to adjust how your investments are allocated. Additionally, if you’re nearing retirement or planning for a major life transition, it’s a good time to reassess your investment strategy and see if it’s still appropriate for your timeline and risk tolerance.
Regularly reviewing your goals can provide clarity as you head into the new year and help you make adjustments that align with where you’re heading next.
- Assess Asset Allocation
Asset allocation—how you divide your investments across stocks, bonds, and other asset classes—is crucial to your overall investment strategy. Over time, market performance can cause your portfolio’s asset allocation to drift from its original intended balance.
For instance, if your stocks have grown significantly, your portfolio may now carry a higher level of risk than you’re comfortable with. Conversely, underperforming investments may have reduced your exposure to growth opportunities. This fall, take the time to assess whether your asset allocation is still in line with your risk tolerance and long-term goals. If not, rebalancing your portfolio could help restore the intended balance.
Rebalancing typically involves selling some of the assets that have grown and buying more of those that are underrepresented in your portfolio. Selling winners and buying losers can be a strategy to manage risk and enhance diversification, but it’s important to consider individual circumstances and market conditions.
- Review Investment Performance
A fall portfolio clean-up is also a good time to evaluate how your individual investments have performed over the year. Take a closer look at each stock, bond, or fund in your portfolio, comparing their performance to relevant benchmarks and your expectations.
If an investment has significantly underperformed for a sustained period, consider whether it’s worth keeping. However, it’s important not to react to short-term market movements—investment performance should be evaluated with a long-term perspective. Some fluctuations are normal, and every asset will go through up and down cycles. The key is to determine whether an investment is still aligned with your overall strategy.
If an investment has shown strong performance, consider whether its current allocation in your portfolio may be excessive and could potentially increase risk. This is a good opportunity to make strategic decisions about trimming or holding certain investments.
- Harvest Tax Losses (or Gains)
Tax-loss harvesting is a strategy that involves selling investments that have lost value to offset capital gains from selling better-performing assets. This can reduce your taxable income for the year and help you manage your overall tax liability.
When implementing tax-loss harvesting, be mindful of the wash-sale rule, which prevents you from buying back the same or a substantially identical security within 30 days of selling it. It’s also important to work with a tax advisor who can help you navigate tax strategies while staying compliant with tax regulations.
If you’ve had a year of high gains, you might consider reviewing your portfolio to see if there are any opportunities to realize some of those profits. This could be particularly beneficial if you expect to be in a higher tax bracket in the future, or if you need to withdraw funds to meet year-end financial goals.
- Check on Retirement Contributions
As you continue with your fall portfolio clean-up, review your retirement account contributions to make certain you’re taking full advantage of any tax-deferred savings opportunities. Contributing to a 401(k), IRA, or another retirement account can be a beneficial step for your financial future, but it’s important to consider your individual circumstances and financial goals.
If you’re 50 or older, don’t forget about catch-up contributions, which allow you to contribute more to your retirement accounts than the standard annual limits. Even if you can’t contribute the full allowable amount, contributing something can still be beneficial. Additionally, check whether your employer offers a retirement contribution match, and try to contribute enough to take full advantage of it.
- Review Fees and Expenses
Investment fees and expenses can eat into your returns over time, so it’s worth reviewing the costs associated with your investments. These might include management fees for mutual funds, commissions on trades, or fees from your financial advisor.
Fall is a great time to ensure you understand what fees you’re paying and whether they’re reasonable for the services you’re receiving. If the fees are too high or you’re not getting value for the cost, consider switching to lower-cost investment options, such as exchange-traded funds (ETFs) or index funds, which typically have lower expense ratios.
- Prepare for the Year Ahead
Finally, as you wrap up your fall portfolio clean-up, think about the year ahead. What financial goals do you want to achieve in the next 12 months? Are there any changes to your personal or professional life that could impact your investment strategy?
Take time to outline your priorities for the new year, whether that’s continuing to grow your portfolio, generating income, or preparing for retirement. Planning ahead can help you align your portfolio with your evolving financial goals, which may contribute to your confidence entering the new year.
Consider a Fall Portfolio Clean-Up to Strengthen Your Finances
Fall is a great time to review and refresh your portfolio as the year winds down. By conducting a fall portfolio clean-up and taking a closer look at your financial goals, asset allocation, and investment performance, you can make informed adjustments that help prepare your investments for the year ahead. Whether you’re rebalancing, harvesting losses, or reviewing fees, a fall portfolio clean-up is a practical way to keep your portfolio stays on track.
Sources:
- [1] https://www.investopedia.com/terms/a/assetallocation.asp
- [2] https://www.investopedia.com/terms/r/risktolerance.asp
Amy Anderson joined the ILG Financial team in 2023 as the client relations coordinator. Her responsibilities include scheduling of appointments, annual check-up notifications, and annuity and required minimum distribution assistance. She is a graduate of Harding University with a degree in Computer Information Systems. Amy and her husband have two children and she enjoys reading, crocheting, music and spending time with her family.
Chase Lopez joined the ILG Financial team in 2020 as an advisor. Chase is a 2016 James Madison University graduate with a degree in management. Chase has been trained under the tutelage of Dave Lopez, who is not only the founder and managing member of ILG Financial, but also is Chase’s uncle and godfather. He also enjoys working alongside his cousin, Megan, who is Dave’s daughter. Chase, as a fiduciary, believes in putting his clients interests first, and building out plans for his clients where they can have a happy and fruitful retirement. He married his beautiful wife in February 2022 and both use most of their free time chasing around their little pup, Aurora.
Jessica Carson joined the ILG Financial team in 2018 as an agent. Jessica and her husband have four children, two dogs, 3 barn cats, 5 chickens, and three parakeets. She indeed loves her children and pets! When not at work, Jessica enjoys playing the piano and cello as well as traveling and spending time outside with her family, hiking, fishing, and boating.
Terri Center joined the ILG Financial team in 2019 as client services manager. She handles client records, application processing, and gathering information to provide a professional and friendly experience with all of our clients. Terri is a graduate of Oakland University. She is married and has two children. She enjoys hiking, family time, and puzzle challenging video games. She also likes to share her creativity in her canvas paintings and sewing projects.
Megan Jones joined the ILG Financial team in 2020 as marketing director. Megan and her husband live in Fredericksburg, VA with their German Short Haired Pointer, Gus. Megan is a graduate of Longwood University and holds a degree in communications. Megan is the oldest of Dave Lopez’s three children and not only enjoys working alongside her father, but also with her cousin, Chase, who joined the ILG Financial team in 2020 as an advisor. When not at work, Megan enjoys sitting on the back porch with family and friends enjoying food and music.