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How to Review and Adjust Your Investment Portfolio for the New Year

The start of a new year is a natural time for reflection and goal setting, and for many, that includes reviewing their finances. While resolutions around spending less or saving more are common, one area often overlooked is the importance of reviewing and adjusting your investment portfolio.

“Investment markets change, financial goals evolve, and your own risk tolerance may shift over time. Regularly evaluating your portfolio ensures that you’re on track to meet your long-term goals and that your investments are aligned with your current needs,” advises Patricia Klein, Assistant Branch Manager at David Lerner Associates, Inc.

This January, take the opportunity to give your portfolio the attention it deserves. Here’s a step-by-step guide to help you assess, adjust, and optimize your investments for the year ahead.

      1. Assess Your Financial Goals
        Before diving into specific adjustments, start by revisiting your financial goals.What do you hope to accomplish with your investments? Are you saving for retirement, buying a house, funding education, or building wealth for future generations? Each goal has different time horizons, risk tolerance levels, and growth expectations.

        If your financial goals have shifted—maybe you’re closer to retirement than you were last year, or you’re planning for a big purchase—it’s important to align your investment strategy accordingly.

        Short-term goals, like saving for a vacation or a car, may require more conservative investments, while long-term goals can handle a bit more risk for potential growth. Knowing your goals will set the foundation for any changes you make to your portfolio.

      2. Evaluate Your Asset AllocationAsset allocation refers to how you distribute your investments across different asset classes, such as stocks, bonds, and cash. This is a key factor in determining your portfolio’s risk and return potential.

        A 2021 NerdWallet survey revealed that many Americans are unsure about the types of investments held in their accounts.

        If you haven’t rebalanced your portfolio in a while, your allocation might have drifted due to market movements.

        For instance, if stocks performed well last year, they might now represent a larger portion of your portfolio than you initially planned. This shift can leave you overexposed to risk, especially if the market takes a downturn. January is a good time to review your target allocation and ensure it’s still in line with your goals and risk tolerance. Adjust as needed to bring your portfolio back into balance, possibly shifting some funds from stocks to bonds or vice versa.

      3. Review the Performance of Individual Investments Not all investments perform equally, and it’s normal for some to underperform. However, consistent underperformance or misalignment with your strategy may indicate that it’s time to make a change. Review each investment in your portfolio—stocks, mutual funds, ETFs, bonds—and assess its performance over the past year.

        Ask yourself whether each investment is meeting your expectations and if it still aligns with your overall strategy. If a stock or fund consistently lags behind the market, consider whether it’s still worth keeping or if there are better alternatives.

        On the other hand, don’t make hasty decisions based solely on short-term results; focus on the longer-term prospects and how each investment contributes to your overall goals.

      4.  Consider Market Conditions & Economic Trends The investment landscape is constantly evolving, influenced by economic trends, interest rates, and geopolitical events. While trying to time the market is generally a risky endeavor, it’s wise to be aware of broader market conditions when adjusting your portfolio.

        For example, if interest rates are rising, you might want to reduce your exposure to long-term bonds, which can lose value in such an environment. If inflation is a concern, consider adding investments that typically perform well during inflationary periods, such as commodities or real estate.

        Staying informed about market trends allows you to make strategic adjustments that can enhance your portfolio’s resilience and growth potential.

      5. Rebalance Your Portfolio to Manage Risk  Portfolio rebalancing is the process of realigning your investments to match your target asset allocation. Over time, as some investments perform better than others, your portfolio can drift from its intended allocation. This drift can expose you to more risk or, conversely, make your portfolio too conservative for your growth goals.

        To rebalance, sell portions of overperforming assets and use the proceeds to invest in underperforming areas, bringing your portfolio back in line with your target allocation. For example, if stocks now make up a larger portion than desired, you could sell some stock holdings and invest the proceeds in bonds or other asset classes.

        Rebalancing helps maintain a level of risk that’s comfortable for you and keeps your portfolio aligned with your financial goals.

      6.  Look for Opportunities to Minimize TaxesTax efficiency is an important, yet sometimes overlooked, aspect of portfolio management. Certain strategies can help you minimize the tax impact of your investments, maximizing your returns in the long run.

        Consider tax-loss harvesting, which involves selling investments that have lost value to offset gains from other investments. This can reduce your tax bill and allow you to reinvest in more promising assets.

Investing is a journey, and your portfolio should evolve with you. An investment counselor can help you with regular reviews and adjustments to ensure your investments stay on track, supporting your financial goals and adapting to changes in your life and the market. Taking time now to review and adjust your portfolio can lead to better outcomes over the long term.

Ready to get your investment portfolio in shape for the new year? At David Lerner Associates, we’re here to help you make informed decisions and guide you toward financial wellness. Our experienced advisors can assist you in reviewing, rebalancing, and adjusting your portfolio to align with your goals.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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