INVESTING ESSENTIALS
Max retirement saving account contributions
Evaluate your investment mix against risk and goals
The new year is always a great time to evaluate where you are with your investment plan and consider making changes to try to improve your standing.
Are you where you want to be with your investment goals? If not, you’re not alone. About 38% of Americans cited improving their finances as a top resolution for 2024.1
Investing goes hand-in-hand with saving, and there are plenty of investing habits that may put you in better shape for achieving your New Year’s financial resolution.
Make a long-term plan—and revisit it annually. Investing money without a plan can leave you without direction or motivation. Write down how much you’re currently investing, how much you plan to invest over time, and what goals you’re hoping to achieve. Then revisit your strategy at the same time next year.
Invest more. The median household retirement savings for all families was $87,000 as of 2022, the most recent year of data available.2 The average retirement age for Americans is 62, according to a 2024 survey.3 Even with Social Security, those retirement savings may not be enough to finance a comfortable retirement. If you aren’t maxing out your retirement savings accounts, such as your IRA and your 401(k), this may be an ideal time to bump up your contributions.
Invest regularly. If you haven’t automated your investment contribution plan, you’re missing out on a popular method that simplifies the process. Once you’ve chosen your investments, making regular contributions to those investments helps continue to build your wealth by taking advantage of compounding interest. You arrange to have a set amount of money automatically transferred from your bank into your investment account each month. Your contributions will continue to flow into your investment plan without any additional effort on your part.
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Read more. Reading can help you become more aware of ideas or events that may affect the way you invest. Make it a habit to peruse the news regularly to stay up to date on market trends and potential investment opportunities. You may find that you may develop a better understanding of how markets are continuously changing.
Get your high-interest debt off the table. If you have debt, pay your higher interest loans off first and then focus on the rest of your debt. If you accomplish eliminating your debt, you’ll have more money to put toward saving and investing if you no longer pay interest on debt such as car loans and credit cards. To make it easy, use online debt pay-off calculators to help determine how much you would need to pay toward your balance each month to pay off each high-interest debt by next year. For instance, if you have a $5,000 credit card balance with a 20% interest rate, you will need to submit $463 a month to pay it off in 12 months without adding any additional credit charges.
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Evaluate your investment mix against your risk tolerance. How long has it been since you looked at how your money is being allocated and compared it with your original goals and tolerance for risk in your investments? As the markets ebb and flow, you may find yourself with a different allocation of stocks and bonds than you initially intended, which may not align with your current risk profile. Even if your investments are all in diversified mutual funds your allocation may have gotten out of whack.
Maybe when you first started investing, you focused on a specific asset class that was currently producing above-average gains, such as small-cap growth funds or emerging market funds. But concentrating your wealth in a single area of the market can be a recipe for disaster if that segment slides. This year consider branching out to other funds or asset groups to spread your risks. Or consider putting your money into an asset allocation fund that invests across multiple asset classes, such as stocks and bonds. While diversification may not prevent you from losing money on your investments, it may help mitigate losses.
Learn to sit still. Chasing performance—selling one type of investment to buy another type of investment that is currently doing better—is time consuming and increases the risk factor in your portfolio. Once you’ve established that you’re in the right mix of investments and that you’re putting enough away, practice patience and stick with your asset allocation strategy for the long haul—or until you reach a point in your life when it makes sense to tweak your allocation to align with your current goals and objectives.
In the end, managing your investment portfolio may be as simple as setting some concrete goals and checking in more frequently on your progress. Each year you start a new calendar, consider taking steps toward becoming a more consistent, diversified investor to put you on a better track for savings and investment success.
1 Forbes Health/OnePoll survey, “Top 2024 New Year’s Resolutions” December 2023.
2 Board of Governors of the Federal Reserve System, “Survey of Consumer Finances, 1989-2022” December 2023.
3 2024 MassMutual Retirement Happiness Study, November 2024.
The information provided is not intended as a source for tax, legal or accounting advice. Please consult with a legal and/or tax professional for specific information regarding your individual situation.
