The end of the year is a great time to take a close look at your investing strategies and decide whether they are working for you or not. Many people do an assessment of their brokerage account this time of year because they’re going to do their taxes soon, but there are other reasons to do an annual check.
For example, your financial situation may have changed, you may be nearing retirement, or your risk tolerance may have changed. Whatever the reason, here are some things you should consider doing with your brokerage account before 2024.
1. Rebalance your portfolio
Over time, the value of your investments will fluctuate, causing some to be worth much more than others. This is normal, of course, but it can throw your portfolio out of balance.
For example, perhaps the value of your technology actions has increased significantly over the past year, while some of your energy stocks have not performed well. If you want to balance both types of stock sectors, you might consider selling some of your technology stocks or buying more energy stocks.
Rebalancing also applies to the types of investments you make, such as stocks versus obligations. For example, if you want a growth-oriented asset allocation, you want to keep 70% of your money in stocks and 30% in bonds. A quick look at your brokerage account at the end of the year will show you if you’re still meeting this goal.
2. Reevaluate your investment thesis
This may be a general reevaluation of how you invest your money, a reexamination of individual investments, or both.
For example, look back at your investment performance over the past year and ask yourself if your stock purchases are giving you the results you want. Did you take too many risks or not enough? Have you leaned too far toward one investment idea that has prevented you from diversifying your investments?
I have a stock that I’ve been very patient with, but it hasn’t performed well over the last few years. The company is facing new hurdles that it didn’t face when I bought the shares, which has changed my investment thesis for the company.
Take some time to think about the investment decisions you’ve made and why, and make any necessary changes to your brokerage account based on what you’ve learned. I know I will be.
3. Make sure you are tax efficient
Lower your tax This requirement shouldn’t be the primary determining factor in what you do with the money in your brokerage account, but being tax efficient is certainly worth it.
For example, you may want to determine how much you’ve contributed to tax-advantaged accounts like a traditional account. IRA account or Roth IRA this year and decide to allocate the same amount in 2024. For 2024, the IRS says you can contribute up to $7,000 to an IRA account or $8,000 if you are 50 or older and you would like to make a catch-up contribution. .
Both types of IRA accounts have their tax advantages. In general, the Roth IRA allows your contributions to grow tax-free, while contributions to a traditional IRA will reduce your taxable income. Whatever you choose, it’s a good idea to evaluate whether the strategy is currently working based on your income and your proximity to retirement.
4. Consider speaking to a professional
If making changes to a brokerage account is a tedious task, you may want to hire a financial advisor.
About 35% of Americans call a financial advisor, and hiring one could help you better understand what you should do with your money based on your age, income, risk tolerance and retirement expectations. Discussing all your options with a professional could help you decide which direction to go.
And if you need help but aren’t ready to hire a human professional, consider using a robo-advisor to help you automatically allocate your investments.
Spending time evaluating your brokerage account doesn’t have to be a difficult task. But it can help ensure your investments are on track and your retirement goals are met.
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