Time for a year-end investment review

Published 4:17 pm Friday, December 9, 2016

By Emily Yent

With the holiday season upon us, you may well be busier than usual. However, by spending a few minutes reviewing your investment scenario of this past year, you can see where you’ve been, where you might be going, and what you need to do to keep moving forward toward your long-term financial goals.

So, as you look back at 2016, pay close attention to these elements of your investment picture:

Email newsletter signup

• Performance – Reviewing your investment performance over time is important in helping you determine if you’re on track to achieve your financial goals. So, in evaluating how your investments did in 2016, ask yourself some key questions: How did your investments do relative to their performance in past years? If there was a big difference, what might have accounted for it? Were your returns relevant to your long-term goals? In other words, if you have already established a return rate you’ll need to reach your goals – and you should indeed set such a rate – were your actual returns “on track” to help you make progress toward your objectives? And, just as importantly, were your return expectations realistic, based on your investment mix and the market environment?

• Investment mix – If you are a diligent investor following a well-designed strategy, you probably started out in 2016 with an investment mix that reflects your risk tolerance, time horizon, and short- and long-term goals. But over time, your investment mix can change, even without your having done so on purpose. If you owned a certain percentage of an asset, such as growth stocks, and those stocks appreciated in price substantially, they could take up a larger percentage of your portfolio than you had intended, thereby exposing you to a higher risk level than that with which you are comfortable. So now that the year is coming to a close, examine your investment mix to see if it needs “rebalancing.”

• Contribution levels – Are you taking full advantage of your 401(k) or other employer-sponsored retirement plan? Specifically, if you got a raise this past year, did you boost your contributions to your plan? The more you invest now, and throughout your working life, the less likely it will be that you have to play “catch up” in the years immediately preceding your retirement.

• Mistakes – We all make mistakes in every walk of life – including the way we invest. In looking back over 2016, can you spot some investment mistakes you might have made? Did you temporarily “bail out” on investing immediately after the “Brexit” vote, only to find, a few weeks later, that the markets had soared to record highs? Did you act on impulse and buy a so-called “hot” stock that turned out to be inappropriate for your needs and risk level? While mistakes like these might be costly in the short term, they can ultimately prove invaluable – if you learn from them.

We’re just about ready to turn the page on the 2016 calendar. So, as you review your investment decisions for the past year, try to determine what worked, what didn’t – and what you can do to improve your results in 2017.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.