Key Takeaways

The beginning of the year is a great time to make financial resolutions

Take that first step and make your personal and financial resolutions for 2021

These five resolutions can be guidelines for helping you get your portfolio in shape for 2021

What’s not to like about making New Year’s resolutions, especially this year when so many people are eager to turn the calendar from what’s been a hard 2020 for so many to a brighter, more hopeful 2021. 

New Year’s resolutions are based on good intentions—an opportunity to work toward self-improvement, improve your life, or fulfill your dreams. But sticking to them for the entire year can be a challenge. Often, there’s a spike in enthusiasm during the first couple weeks of the year, and then things tend to dwindle to the point where resolutions are forgotten by spring.  

This year, when you make a list of important life changes you want to make, try mixing things up a bit. Consider how you can apply the same resolutions to yourself and to your investment portfolio. 

#1: Exercise More

A sedentary life isn’t good for you or for your portfolio. On the personal front, the resolution to exercise more might mean hitting the gym, attending a Zumba class, or going for a walk. But your portfolio needs to be financially fit as well. It might not be prudent to let it sit idle for the entire year. Consider making it a habit to regularly revisit your portfolio and evaluate it weekly, monthly, or quarterly.

Regular portfolio evaluation can help you to determine if your portfolio is helping you track toward your objectives or goals. Does the way you react to the performance of your portfolio warrant changing your asset allocations or rebalancing?

And don’t forget that things don’t always go as planned. Life-changing events could mean your financial goals may need to be modified.

Having a financially fit portfolio helps to make you a more engaged investor.

#2: Lose Weight

While evaluating your portfolio, maybe you found some overlapping investments or investments that don’t provide material diversification. You’re familiar with the sage advice of not putting all your eggs in one basket. If you find too many of your assets are overweighted in one sector, you may want to consider shedding some of that extra “weight” and diversifying among different sectors. Spreading out your assets across different asset classes or sectors could help reduce portfolio risk. But keep in mind that diversification does not eliminate the risk of experiencing investment losses.

Another form of extra weight could be your liabilities—mortgage, student loans, car payments, credit card debts, credit lines, etc. Some may be unavoidable, but some could be reduced, restructured, or eliminated entirely.

Think of ways to cut out extra bloat.  

#3: Learn a New Skill

We all know that a new skill can be beneficial in many ways, regardless of one’s life stage. That’s why resolution-makers often include learning to play the piano or taking an art class in the annual list.  

So how about financial knowledge? TD Ameritrade offers many investor education resources ranging from investing basics to complex trading strategies—all at no charge to clients. If you’re an investor, you may benefit by learning about economic and market cycles and how they impact your portfolio. If you’re a trader and have traded stocks for a few years, you may wish to consider learning about options to augment your trading strategy. The tools are available to you.

The markets are dynamic, so stay on top of your game by expanding your knowledge base.

#4: Get Organized

You may have different investment vehicles in your portfolio, such as individual stocks, mutual funds, or exchange-traded funds (ETFs). You most likely have an employer-sponsored retirement plan or individual retirement plan (such as a traditional or Roth IRA). Perhaps you have a health savings account, real estate investments, or annuities. When you have a bunch of assets in your portfolio, it can be easy to lose track of what’s what. You may want to spend some time organizing everything so it isn’t tedious to look at your entire portfolio.

It’s also important to keep track of your income and expenses. This can help you figure out how much you can put away for retirement every year. You can consider automatic savings to help you regularly stash away a certain amount every month.

Additionally, the end of year can be a good time to make sure you have the proper beneficiaries designated in your life insurance and retirement accounts, as well as making sure that you have a well-established will or estate plan that honors your wishes should anything unexpected happen.

An organized portfolio can go a long way toward helping you identify how the different components of your portfolio are performing. If it seems daunting, you may want to work with a financial professional to help pursue your financial goals. Personalized Portfolios from TD Ameritrade Investment Management, LLC can provide this type of investment guidance.

#5: Stop Procrastinating

Reviewing your portfolio and making financial decisions often become low-priority items. But postponing financial planning to the end of the year might result in hiccups. For example, there may be tax savings strategies you could apply to potentially lower your tax bill. You could also change your contribution amounts to your retirement plans to help reach your retirement goals.

Maximum contribution limits cannot be exceeded. Contribution limits provided are based on federal law as stated in the Internal Revenue Code. Applicable state law may be different.

TD Ameritrade does not provide legal or tax advice. Please consult your legal or tax advisor.

If you wait until the end of the year to take advantage of these strategies, you may miss out on some opportunities. If you start financial planning early in the year, you’ll have the time to make strategic decisions instead of hasty ones. New rules tend to pop up every year, and staying on top of them could help you plan accordingly.

Bottom line: Get all your ducks in a row and make sure you have a long-term plan. And if you feel overwhelmed by the process, TD Ameritrade clients can set up a goal-planning session with a financial consultant.

Before the Clock Starts Ticking

Think of your portfolio resolutions as activities that may help you work toward securing a bright financial future for yourself and your family. Laying out a carefully considered plan at the beginning of the year and setting portfolio resolutions can be a step in the right direction. The challenge will be adhering to them. Consider putting a reminder on your calendar for a mid-year review in 2021 to assess your progress and to make sure you’re still tracking with your financial goals for 2021. 

Cheers to the New Year!

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