End of the Year Investing Checkup for Mutual Fund Investors

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End of the Year Investing Checkup for Mutual Fund Investors

Miranda Marquit Headshot
If you want to verify your physical health, an annual checkup is a good idea. The same principle applies to your financial health. As you reflect on your finances this year, don’t forget to include an investing checkup.
Your investing checkup is a vital part of your overall financial picture, since your portfolio is an essential piece to your life’s money puzzle. Unfortunately, a number of investors neglect to review their assets at the end of the year. Before this year slips away, sit down and review your investment portfolio.

Review Your Investment Goals

The first step in your investing checkup is to review your investment goals. Without a clear idea of what you hope your money will accomplish on your behalf, there is very little point to reviewing your portfolio. Consider your long-term and short-term uses for your money.

Too many investors don’t think about what their money will be used for, and what they will need to accomplish their goals. According to the Employee Benefits Research Institute, less than half of workers have performed a retirement needs assessment. Other investment needs, including income, college, and other goals, probably haven’t been assessed by many people, either.

Review your investment goals, and remind yourself of your investment plan. As you move through your investing checkup, evaluate your progress in light of how your efforts will impact your ability to reach your goals.

Portfolio Diversification

Over time, there is a good chance that your investment portfolio will lose some of its earlier diversity. As mutual funds experience turnover, it’s very possible that you could end up with duplicate holdings across your funds.

Take a look at the investments used in your mutual funds. Do you have several shares of the same company across multiple mutual funds? In some cases, your lack of diversity might have more to do with becoming heavy in a particular sector. You might also notice that you don’t have as much diversity as you would like in terms of geography. Are you heavy on stocks from South America, but missing exposure to Europe?

Your desired portfolio diversity will depend on your goals. If you are in the growth phase of your portfolio, the types of assets you include will be different from the diversity required when you are using your portfolio for income. Make sure that your portfolio’s diversity matches with your current risk tolerance, and that it matches up with your goals for the future. If you need to make changes, you can sell shares of certain mutual funds and other assets and replace them with investments that better meet your needs.

Investment Fees Review

According to some research, retirees could be leaving as much as $155,000 on the table due to 401(k) fees. Even if you don’t have a 401(k), investment fees might be a very real concern for your portfolio. Just as compound interest can work in your favor, allowing your investment portfolio to grow over time, the fees you pay compound in terms of what you are missing out on. You don’t just miss out on the real returns from fees paid this year; you also miss out on the potential gains that money would have returned if it had been allowed to grow in your account.

Review the fees you are paying. How do your mutual fund, ETF, and plan administration fees compare to what you have access to? Are you paying high transaction fees? Do the returns you receive justify the fees you are paying to money managers? Run a comparison, and determine whether or not it makes sense to move your money into vehicles that allow you to keep more of your money.

Tax Harvesting Losers

After you have performed your investing checkup, it’s time to make changes to your portfolio. Whenever possible, it helps to first get rid of the losers. If an investment no longer fits your goals and needs, or if the fundamentals have changed to the point that the best you can do is cut your losses, you can derive a tax advantage from your capital losses.

You can sell losing investments to offset capital gains received from selling appreciating investments. Once that is done, you can use up to $3,000 in capital losses to offset other income. Additionally, you can carry forward any remain excess to another year. Keeping good records is essential when you want to harvest your losses.

The Bottom Line

Your investing checkup, if performed each year, can be a great time to review your situation, make necessary changes, and reposition yourself for greater success in the year to come.

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Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

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Find out why $30 trillon is invested in mutual funds.


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Miranda Marquit Headshot

End of the Year Investing Checkup for Mutual Fund Investors

If you want to verify your physical health, an annual checkup is a good idea. The same principle applies to your financial health. As you reflect on your finances this year, don’t forget to include an investing checkup.
Your investing checkup is a vital part of your overall financial picture, since your portfolio is an essential piece to your life’s money puzzle. Unfortunately, a number of investors neglect to review their assets at the end of the year. Before this year slips away, sit down and review your investment portfolio.

Review Your Investment Goals

The first step in your investing checkup is to review your investment goals. Without a clear idea of what you hope your money will accomplish on your behalf, there is very little point to reviewing your portfolio. Consider your long-term and short-term uses for your money.

Too many investors don’t think about what their money will be used for, and what they will need to accomplish their goals. According to the Employee Benefits Research Institute, less than half of workers have performed a retirement needs assessment. Other investment needs, including income, college, and other goals, probably haven’t been assessed by many people, either.

Review your investment goals, and remind yourself of your investment plan. As you move through your investing checkup, evaluate your progress in light of how your efforts will impact your ability to reach your goals.

Portfolio Diversification

Over time, there is a good chance that your investment portfolio will lose some of its earlier diversity. As mutual funds experience turnover, it’s very possible that you could end up with duplicate holdings across your funds.

Take a look at the investments used in your mutual funds. Do you have several shares of the same company across multiple mutual funds? In some cases, your lack of diversity might have more to do with becoming heavy in a particular sector. You might also notice that you don’t have as much diversity as you would like in terms of geography. Are you heavy on stocks from South America, but missing exposure to Europe?

Your desired portfolio diversity will depend on your goals. If you are in the growth phase of your portfolio, the types of assets you include will be different from the diversity required when you are using your portfolio for income. Make sure that your portfolio’s diversity matches with your current risk tolerance, and that it matches up with your goals for the future. If you need to make changes, you can sell shares of certain mutual funds and other assets and replace them with investments that better meet your needs.

Investment Fees Review

According to some research, retirees could be leaving as much as $155,000 on the table due to 401(k) fees. Even if you don’t have a 401(k), investment fees might be a very real concern for your portfolio. Just as compound interest can work in your favor, allowing your investment portfolio to grow over time, the fees you pay compound in terms of what you are missing out on. You don’t just miss out on the real returns from fees paid this year; you also miss out on the potential gains that money would have returned if it had been allowed to grow in your account.

Review the fees you are paying. How do your mutual fund, ETF, and plan administration fees compare to what you have access to? Are you paying high transaction fees? Do the returns you receive justify the fees you are paying to money managers? Run a comparison, and determine whether or not it makes sense to move your money into vehicles that allow you to keep more of your money.

Tax Harvesting Losers

After you have performed your investing checkup, it’s time to make changes to your portfolio. Whenever possible, it helps to first get rid of the losers. If an investment no longer fits your goals and needs, or if the fundamentals have changed to the point that the best you can do is cut your losses, you can derive a tax advantage from your capital losses.

You can sell losing investments to offset capital gains received from selling appreciating investments. Once that is done, you can use up to $3,000 in capital losses to offset other income. Additionally, you can carry forward any remain excess to another year. Keeping good records is essential when you want to harvest your losses.

The Bottom Line

Your investing checkup, if performed each year, can be a great time to review your situation, make necessary changes, and reposition yourself for greater success in the year to come.

Sign up for Advisor Access

Receive email updates about best performers, news, CE accredited webcasts and more.

Popular Articles

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.


Read Next

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