As we get closer to 2024, now is the perfect opportunity to review your investment portfolio and start creating an action plan for next year.
Everyone’s approach to investing will be slightly different, and there are no hard rules as to how you should manage your portfolio. But by taking these three steps now, you can ensure you’re heading into the new year ready to maximize your earnings.
1. Double-check that your stocks are still strong
Not all investments stay good investments. Companies change, and a stock you bought in the past may not necessarily be a strong choice anymore. While there’s never a bad time to double-check your portfolio, the end of the year can be a good chance to give your investments a review.
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There are plenty of ways to decide whether a stock still belongs in your portfolio, but a great place to start is by reviewing the company’s fundamentals — such as its financials, leadership team, and competitive advantage in the industry.
Have there been any big changes to the company recently? Do any of those changes potentially pose a risk to its long-term performance? Does this stock still fit within your investing goals? By taking time regularly to assess each stock you own, you can make sure your portfolio is as healthy as possible.
2. Reevaluate your asset allocation
Your asset allocation refers to how your investments are divided within your portfolio, generally between stocks and bonds. This is especially important if you’re saving for retirement, as proper asset allocation can help protect your savings against volatility.
When you’re young and still have decades until retirement, you can afford to take on more risk and invest more heavily in stocks. As you age, though, your portfolio should gradually become more conservative. While bonds and other conservative investments tend to see lower returns than stocks, they’re also not as susceptible to the market’s ups and downs.
There’s no single correct asset allocation, as it will depend on your age and risk tolerance. But a general guideline is to subtract your age from 110, and the result is the percentage of your portfolio to allocate to stocks. So if you’re 45 years old, for instance, you may aim to allocate 65% of your portfolio to stocks and 35% to bonds.
Again, this isn’t something you only have to do at the end of the year. But as you take stock of your portfolio, now is a good time to make sure you’re not investing too aggressively or conservatively for your age.
3. Start planning your strategy for next year
One of the best ways to build wealth in the stock market while limiting your risk is to invest at regular intervals throughout the year. This is called dollar-cost averaging, and it can both save you money and help you avoid the risks of mistiming the market.
Right now, then, is a great chance to assess your budget, think about how much you can afford to invest next year, and determine how often you’d like to invest. Maybe you can set aside a couple of hundred dollars per month, for example, or perhaps you’d rather invest on a weekly or even quarterly basis.
Next year’s strategy doesn’t have to be the same as how you invested this year. If your financial situation has changed, or you’re considering investing more, planning your approach now can help you make the most of next year.
There’s never a bad time to review your investing strategy, but the end of the year can be a good opportunity to double-check your portfolio and get ready for 2024. By making these three moves now, you can ensure you’re doing everything possible to set yourself up for success in the stock market.
