The end of the year provides a natural checkpoint to review your investment progress, assess whether your strategy remains appropriate, and make adjustments for the year ahead.
Reviewing Performance in Context
Compare your portfolio's performance to appropriate benchmarks, not arbitrary return expectations. A "disappointing" year might actually be reasonable given market conditions. Focus on whether your portfolio behaved as expected relative to your allocation.
Assessing Allocation Drift
Market movements cause your allocation to drift from targets. Year-end is an ideal time to rebalance—bringing your portfolio back to intended allocations. This maintains your desired risk level and enforces buying low and selling high.
Tax-Loss Harvesting Opportunities
Before year-end, review holdings for tax-loss harvesting opportunities—selling investments at a loss to offset gains. Be mindful of wash sale rules and ensure any harvesting aligns with your overall investment strategy.
Life Changes and Goal Updates
Has anything changed in your life that affects your investment strategy? Job changes, family developments, or shifting goals might warrant adjustments to your time horizon, risk tolerance, or target allocation.
Setting Intentions for the New Year
Rather than making predictions about markets, focus on what you can control: contribution rates, investment costs, tax efficiency, and maintaining discipline. Write down your intended actions to increase follow-through.
Key Takeaway
A thoughtful annual review helps ensure your investment approach remains aligned with your goals and circumstances, while avoiding the trap of reactive decision-making.