As Year Ends, Take Stock In Your Investments

By Jon Ten Haagen

As 2015 winds down, it is time for us to start planning for 2016. Let’s forget about that New Year’s diet or health plan. How about a health plan for your financial future? I know it is a fleeting thought each year that happily goes away quickly. Not so fast! Every year, you ignore your long-term investment and financial planning goals and needs you have that much less time to achieve your intended goals.

Here are some questions to ask yourself: How did your investments perform during the year? Did they outperform, match or under-perform your expectations? What did you base your expectations on? What caused your portfolio to perform the way it did? Was it due to multiple factors? Were there any consistencies or anomalies compared to past performance? Does money need to be redirected in order to pursue your short term and long term goals? Is your portfolio adequately diversified, and does your existing asset allocation still make sense?

Answering these issues might help you determine whether your investment strategy needs to change in the coming year.

Aim for balance. During the portfolio review process, look at your current asset allocation among stocks, bonds and cash alternatives. You might determine that one asset class has outperformed the others and now represents a larger proportion of your portfolio than desired.

In this situation, you might want to rebalance your portfolio. This process of rebalancing typically involves buying and selling securities to restore your portfolio to your targeted asset allocation based on your risk tolerance, investment objectives and time frame. Your professional certified financial planner can help you understand how your investments may be affected by capital gains and losses and other taxes.

After your year-end investment review, you might resolve to increase contributions to an IRA, a ROTH IRA, an employer-sponsored retirement plan, or a college fund next year. With a fresh perspective on where you stand, you may be able to make better choices next year, which could potentially benefit your investment portfolio over the long term.

Here are some thoughts to consider as we move into the New Year:

• Make sure you are getting the full company match on your 401(k), at least, and increase your contribution amount for 2016.

• Lower your income with strategic charitable giving.

• Start making sure you’ll use up your FSA.

• Get your tax prep going so that if you are getting a refund you can file early.

• Get your money working for you sooner. If you regularly get a very large refund each year, consider readjusting your withholding so that you are not lending your money to the government with a tax free loan!

• Make the year-end a time to get your one free credit report from one of the three major credit bureaus.

• Give your heirs a holiday gift they will appreciate some day by writing up a detailed will if you haven’t already. If anything changes over the years – divorces, birth of a c child or grandchild, a death – then review your primary and contingent beneficiaries to make sure it’s still what you want.

• Do a spending check to make sure that if your financial picture has improved, such as with a raise, you are not increasing your spending and becoming a victim of “lifestyle inflation.”

We want to thank you for your engagement in reading our articles throughout 2015 and hope you find them useful. If there is a topic you want us to address reach out and give us your questions. From “Ask the Expert” we wish you a very joyous holiday season and a safe, healthy and happy New Year.