Has 2026 Been Good for Your Portfolio? Here Are 5 Things To Do Before January
A strong year in the market can compel investors to either make risky moves to keep the returns going or become risk-averse to preserve what was gained. Either move might be too far in the wrong direction.
Instead, before January, investing experts recommend doing a year-end checkup that looks beyond returns at potential taxes, retirement-account contributions and upcoming goals. Here are five steps to follow.
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1. Check Whether Your Portfolio Has Drifted From Its Target Mix
Megan Wiley, a certified financial planner (CFP) at Badgley Phelps Wealth Managers, said investors should revisit allocation after a strong year with the goal to “bring the portfolio back to an investor's risk tolerance.”
Start by comparing your current mix of stocks, bonds, cash and other holdings with the allocation you originally chose for your goals and risk tolerance.
One result of a good year, according to Brianna Rodgers, director of investor education at Madison Trust Company, is that the outperforming asset “can become a larger percentage of a portfolio without the investor making an intentional decision to increase that exposure.”
It's important to come back to your original goals.
2. Take Gains Strategically Instead of Chasing Recent Winners
A strong year may be a good time to sell a portion of investments that have grown larger than you originally intended them to be in your portfolio, according to Wiley. The decision should be tied to your target investment mix and long-term plan.
“This maintains discipline, locks in profits and in the long run will help to spread capital gains over time,” she said.
Rodgers cautioned against mistaking recent gains for a guarantee that “recent performance will continue indefinitely.” After a good year in the market, investors may become overly confident, increase their exposure to recent winners or take more risks than preciously intended.
Another mistake is abandoning diversification after a strong year. “Past performance generally does not guarantee future results," Rodgers said.
3. Calculate the Tax Cost Before Selling Appreciated Investments
Before selling, investors should estimate the impact of gains on their tax bill. This is especially important for taxable brokerage accounts, where gains may be subject to federal and state taxes.
Invests should also pay close attention to the thresholds for reaching either the 15% or 20% capital gains rates, when the net investment income tax would apply to them, Wiley said.
For investors with substantial gains, she suggested spreading any large gains into two tax years “by realizing gains at year end and in the new year.”
Getting professional guidance before acting may be the smartest move.
4. Look for Losses That Could Offset Gains
Even in a strong year, not every investment performs well. Investors with taxable accounts may want to identify losing positions and consider tax-loss harvesting, where selling at a loss can offset other gains in a portfolio.
Investors just need to be careful they don’t trigger wash sale rules “whereby the IRS prevents claiming a deduction on an investment sold at a loss if they buy a security substantially identical within this window," Wiley said.
5. Maximize Tax-Advantaged Accounts and Revisit Near-Term Cash Needs
Before Dec. 31, investors can check whether they have contributed the maximum allowed to workplace retirement plans, including any employer match.
If over the age of 50, Wiley suggested you look for catch-up contribution opportunities, including additional opportunities for those ages 60-63 who are still working.
A big year alone does not necessarily mean an investor should suddenly become more conservative. However, Wiley said that if there are major purchases upcoming, “cash allocation should be reviewed with the core portfolio maintaining its long-term strategy.”
A strong portfolio year is a useful moment to check whether your investments still reflect your goals, taxes and timeline.
Editor’s note: Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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