New Year, New Wealth: 5 Strategic Resolutions Every Investor Should Follow

It’s time to make some investing resolutions. The start of a new year is an excellent chance to do a financial review and see what you’ve accomplished to increase your net worth and grow your investments. Only then can you consider which financial resolutions will help you achieve your money goals going forward.

“There’s never going to be anybody who’s more interested in your financial success than you are, so you have to act accordingly,” said George Grombacher, president of Money Alignment Academy. While it’s easy to be complacent and put things off until next year, Grombacher said, “The time is now. There’s never going to be a better time to do it.”

As the New Year approaches, here are five steps you might consider as you look to improve your investments in the coming year.

Key Takeaways

• The start of the new year is an excellent time to consider some investing resolutions.
• Fixing your finances early and adjusting your planning for the rest of the year is easier to do now than later.
• This time of year is also a great time to limit investment fees and tweak your investments.
• Looking at your taxes now gives you plenty of time to make changes before IRS deadlines.
• Many people break their New Year’s resolutions, but these five goals for your finances shouldn’t be hard to achieve.

1. Pay Fewer Investment Fees

Fees can be a major detractor from your wealth-building efforts, shrinking your investment earnings. They are, in essence, negative returns.

Take mutual funds. The fees for mutual funds can add up, whether through a transaction fee when you buy or sell (which is often called a load) or annual fees that are paid on an ongoing basis.

Moving toward the new year, you have two options for limiting what you’re paying out in fees:

1. Rethink your investment choices. For example, if you’re heavily invested in actively managed mutual funds, you may be able to trim some of the fee fat by opting for passively managed exchange-traded funds (ETFs) or index funds instead.
2. Consider changing financial advisors. If you’ve already chosen relatively low-cost funds, but high advisory fees are eating into your earnings, it may be time to make a change. When vetting potential replacements, carefully review their fees, services, and credentials, so you understand what they offer and your costs.

Many online brokerages offer commission-free trading in stocks and ETFs for do-it-yourselfers. Also, automated robo-advisor platforms can manage your money professionally and automatically based on your financial goals—all for a fraction of what it costs to hire most human financial advisors. There are, of course, trade-offs for this approach.

2. Expand Your Portfolio

Diversification is essential for insulating your investments against volatility in the market. If your investments are concentrated in one particular asset class, you’re putting your whole portfolio at risk if that sector enters a downturn. Injecting some new blood into your holdings should be on your to-do list if this is the case.

Real estate, for example, can be a good hedge against fluctuations in the market. If you’re not investing in properties yet, this could be a great time to consider adding a rental property to your portfolio. As an alternative, investing in a real estate investment trust or real estate crowdfunding could allow you to reap the benefits of owning real estate without buying and managing your own properties.

You may also want to consider buying a small amount of cryptocurrency, such as Bitcoin or Ethereum, to add to your portfolio. Crypto has emerged as a new asset class and is now taken quite seriously by institutional investors, large corporations, and governments. While crypto assets remain volatile and you should only risk what you can afford to lose, it could return results and be a hedge for turns in other parts of the market.

Advisor Insight

Cryptocurrency is just one alternative asset that is becoming increasingly available to everyday investors. “There are a lot of new opportunities coming online in the world of alternative investments that you might want to look at,” said Grombacher, named by Investopedia as one of its top 100 financial advisors. “Alternative investments have been reserved for the ultrawealthy for a long time, but like so many other aspects of personal finance and investing, technology is making that available … democratizing access to alternatives.”

3. Rebalance Regularly

Periodically rebalancing your portfolio helps you maintain the right asset allocation to meet your investment goals. The problem is that all too often, investors aren’t hands-on in managing their investments, preferring a set-it-and-forget-it approach.

If you haven’t paid much attention to rebalancing in the past, the new year is a chance to change things up. For example, if you usually rebalance once a year, consider increasing that to semiannually or quarterly. While you don’t need to review your asset allocation daily (there lies madness and the risk of overreacting to minor market shifts), you should keep a finger on the pulse of what’s happening with your investments.

If you want to rebalance but there’s a chance you’ll forget or don’t have the time to do so, you might consider automatic rebalancing options such as using a robo-advisor or investing in a target-date fund, which will not only rebalance within a given year but also grow increasingly conservative as the target date (e.g., your retirement) approaches.

Grombacher said many investment accounts offer automatic rebalancing to help you keep your portfolio balance aligned with your goals. If your account doesn’t provide an automatic rebalancing feature, it’s up to you to “roll up your sleeves” and bring your portfolio back into equilibrium.

“If you must do it manually, that’s a heavier lift—I get it,” Grombacher said. “But it’s really important that we stay invested in a way that is appropriate to the kind of investor we are. So if I’m a really conservative investor and all of a sudden because of market conditions now I’m a more aggressive investor by nature of my allocation, well I need to rebalance that and bring that back into alignment with the kind of investor that I am.”

If you don’t have access to an automatic rebalancing tool and the do-it-yourself approach seems overwhelming, you can always consult a financial advisor or another financial professional to help guide you through the process.

4. Decrease Your Tax Load

Along with management fees, taxes can present another drain on your investments. This typically isn’t something that you have to worry about with a qualified retirement plan, such as an employer’s plan or an individual retirement account (IRA). With a 401(k) or a traditional IRA, your savings grow tax-deferred, and withdrawals after age 59½ are taxed at your regular income tax rate at the time.

Meanwhile, with a taxable investment account, you have to be mindful of triggering capital gains taxes. These apply when you sell an investment for more than what it cost when you bought it. One way to minimize capital gains taxes is to choose tax-efficient investments, such as ETFs or index funds. These have lower turnover than actively managed funds, reducing the frequency of taxable events.

Tax-loss harvesting is a strategy that you use to trim your taxes. This involves selling lagging securities for a loss (thus driving down your taxable gains for the year) and then buying a different stock or ETF like the one you’ve sold. Many financial advisory services, including automated robo-advisors, offer tax-loss harvesting, sometimes at no extra cost.

Important

You should always check with your accountant or tax advisor before making a decision that may affect your taxes.

5. Create or Update Your Financial Checklist

An annual review of your financial checklist is always a good idea before the new year starts. Here, you’ll want to ensure that any changes you’ve had over the past year or expect to have in the future are reflected in your goals and how you hope to achieve them.

Make sure you have a thoughtful budget that allows you to live your lifestyle while saving enough for emergencies and future goals. Segment your goals by time horizon, from short-term ones, like buying a new washing machine, to medium-term ones, like college savings, and long-term ones, like retirement.

“Maybe you don’t have the money to be allocated toward your long-term financial priorities this year, but knowing and understanding what it’s going to take to get what you want, I think, is a valuable, important thing,” Grombacher said. “So even if you feel like you don’t want to put something on your checklist that’s not in reach, I would still put it on there as an agenda item to consider and start planning for, even if you don’t plan on taking action on it.”

Review your investments to ensure they still satisfy these goals; if not, adjust. You may also use this time to check in with a financial advisor, accountant, or estate attorney to ensure your financial checklist is complete.

What Is Tax Efficiency?

Tax efficiency is when a person or business pays the least amount of taxes required by law. Given the complexity of tax law, it is often prudent for investors to hire tax professionals to ensure that their tax liability is where it should be.

What Is a Financial Checkup?

A financial checkup is a systematic review of the complete state of one’s finances. It is prudent to conduct a financial checkup annually or after major life events such as marriage, birth, or the purchase of a new home.

Should I Hire a Financial Counselor?

Financial counselors help individuals develop financial literacy skills and good financial habits. Whether you need to hire someone to help you develop these skills depends on you and your situation. Financial counselors often charge lower fees than financial advisors and planners and are often geared toward educating clients about managing their money more effectively and responsibly. If you could benefit from financial education and support, a financial counselor might offer the help you need.

What Resolutions Can I Make to Help Reach Medium- and Long-Term Goals?

According to Grombacher, investors thinking ahead toward the long term should pay close attention to the amount they’re contributing versus expected rates of return. “The fundamental truth is that I have zero control over what the stock market is going to do in 2024. I know that it’s going to go up, and it’s going to go down,” Grombacher explained. “But what I have control over is how much I am investing and … making sure that I am investing in a fashion that is appropriate for the kind of investor that I am.”

The Bottom Line

These resolutions can be useful if you’re ready to press the reset button on your investment strategy for the new year. However, the hardest part about making resolutions is sticking to them. To make sure you stay on track, consider how they fit into your larger financial plan.