The start of a new year calls for reflection on many aspects of our lives, including our financials. Even if you’re very happy with how your portfolio performed last year, now is not the time to get complacent. Spend time reviewing what you’ve accomplished in terms of building your wealth, growing your investments, and increasing your net worth. Then, review these three investing resolutions to determine if you can harness more potential over the next 12 months to achieve your investment goals this year.
Investing Resolution #1: Expand Your Portfolio
Many investors learned hard lessons from the COVID-19 pandemic in 2020, particularly just how volatile the stock market can be. While 2021 was a more stable year for the markets, it’s possible that 2022 will bring with it quite a bit more volatility. Of course, one of the best ways to protect your investments from a volatile market is to be sure you’re diversified. So, if your portfolio is currently weighted toward one particular sector or asset class, consider that you’re opening yourself up to more risk than is necessary. Resolve to spread your investments throughout various sectors and asset classes going forward so that a downturn in one area won’t be felt across your entire portfolio.
Investing Resolution #2: Get More Tax Efficient
Do you have funds in taxable investment accounts? If so, it pays – oftentimes literally – to be mindful of the tax implications of each type of account you’re utilizing. If you’ve never done so before, sit down and review how each of your accounts is taxed, how much they’re taxed, and whether you have any opportunities to minimize your tax burden and better protect your wealth. You might find, for example, that your investments are heavily bound by tax laws, in which case you could consider transferring your money into more tax-efficient investments such as ETFs or index funds. You may want to consider proper asset location so that investments that generate income that is taxed at higher tax rates is held inside tax sheltered retirement accounts, rather than in taxable accounts. You might also consider gifting highly appreciated securities to charity or to family members in lower income tax brackets, rather than gifting cash. You may also want to consider strategies like tax loss harvesting so that you can reduce the tax bite from selling appreciated investment assets.
SEE ALSO: Investing 101 for Beginners
Investing Resolution #3: Get Comfortable Rebalancing
Busy investors often “set and forget” their portfolios, but this won’t help you maximize your investment earnings. This year, get comfortable with reassessing and rebalancing. After all, it’s important to check in on your investments periodically to ensure that you’re maintaining the right asset allocations to meet your financial goals.
Rebalancing can feel overwhelming because it’s a bit tedious and does require a commitment of time. However, making an effort to rebalance more frequently this year will give you greater peace of mind in knowing your portfolio is truly working for you. Consider rebalancing bi-annually or quarterly to ensure you’re staying on top of your performance and making adjustments as needed. If you’d like professional assistance, make sure you’re working with an RIA who rebalances for you regularly.
SEE ALSO: Tax Planning Strategies for High-Income Earners
Concluding Thoughts
Each new year offers exciting potential for investors, especially those who are thoughtful and intentional about making investment decisions to truly serve their goals. Employing and keeping investing resolutions like the three discussed above can help you strengthen your finances over the next 12 months and bring you closer to the short and long-term goals you’re working towards.
At Wade Financial Advisory, we offer investment services to help you build a portfolio that is best designed to help you achieve your goals while also moderating your risk. As an independent Registered Investment Advisor (RIA), we make decisions with your best interest in mind so that we can deliver maximum value to each and every client. We use a team approach to leverage our diverse skill set, and we work together to ensure that your portfolio is built considering all your financial needs and goals, cash-flow requirements, tax implications, and wealth transfer strategies.
If you’d like to start a conversation about working with the Wade team, please contact us today. We currently serve clients working for companies such as Tesla, Facebook, Nvidia, Applied Materials, Apple, Microsoft Corporation, Google, Intel, Cisco Systems, Hewlett Packard, Pure Storage, Zoom Video Communications, Amazon, Adobe Inc., Palo Alto Networks and many others. We would be pleased to serve you and your family, too!
