Happy New Year everyone! My hope is that you had a safe holiday with family and friends, ringing in the new year appropriately.
As I say every year, I don’t necessarily see the new year as “starting over” or “beginning fresh”, but rather as a continuation of the previous year, with goals, objectives, priorities and plans for the new year and beyond based on what we learned the previous year.
From a market and economy perspective, they are similar to my thoughts in that neither starts January 1st with a “clean slate”. They continue where they left off, oftentimes with renewed optimism from what was learned in the previous year.
So, as I do each January, I look back at the old year and look forward into the new year, sharing ideas that I’ve learned attending conference calls, Zoom/Teams meetings and in-person events with notable speakers, discussing their thoughts and insight on 2025.
Financial Wellness Month: A Fresh Start for Your Finances
January is Financial Wellness Month, a time dedicated to promoting awareness and education about personal financial well-being. It's an excellent opportunity for everyone, regardless of their financial background, to assess and improve their overall financial health.
What is Financial Wellness Month?
Financial Wellness Month is a designated period focused on helping individuals make informed decisions, manage debt, save, and plan for a secure financial future1. It's about taking a holistic approach to your finances, ensuring that you are not only managing your money effectively but also planning for long-term stability and growth.
Why is it Important?
Starting the new year with a focus on financial wellness sets a positive tone for the months ahead. It encourages you to set goals, create plans, and take actionable steps towards achieving financial stability. Whether it's budgeting, investing, or planning for retirement, Financial Wellness Month is the perfect time to "right the ship" and ensure you're on the right path.
How Can You Participate?
- Assess Your Financial Health: Take a close look at your current financial situation. Identify areas where you can improve, such as reducing debt, increasing savings, or optimizing investments.
- Set Financial Goals: Define clear, achievable financial goals for the year. Whether it's saving for a major purchase, paying off debt, or building an emergency fund, having specific goals will keep you motivated.
- Create a Plan: Develop a detailed plan to achieve your financial goals. This might include creating a budget, setting up automatic savings, or consulting with a financial advisor.
- Educate Yourself: Take advantage of resources and educational materials available during Financial Wellness Month. Attend workshops, read articles, or watch videos to enhance your financial knowledge.
Lessons From 2024
1. Patience is Key: Investments take time. While 2024 had some bumpy moments, sticking with a long-term plan helped many people stay on track.
2. Adaptability Helps: The world is constantly changing. Those who adjusted their strategies to include things like clean energy, Artificial Intelligence, or safer investments like bonds benefited the most.
3. Focus on What You Can Control: Markets go up and down, but you can always control how much you save, spend, and invest wisely.
Actionable Advice for 2025
1. Key word of the new year: Rebalance. What is Account Rebalancing?
Account rebalancing is the process of realigning the weightings of a portfolio of assets. It involves periodically buying or selling assets in your portfolio to maintain your desired level of asset allocation.
Why is it Important?
· Risk Management: Over time, some investments may grow faster than others, causing your portfolio to drift from its original allocation. Rebalancing helps manage risk by ensuring your portfolio remains aligned with your risk tolerance and investment goals.
· Discipline: It encourages a disciplined approach to investing, helping you avoid the temptation to chase market trends.
· Performance: By selling high-performing assets and buying underperforming ones, you can potentially enhance your portfolio's long-term performance.
How Does it Work?
· Set a Target Allocation: Determine the ideal percentage of your portfolio to allocate to each asset class (e.g., 60% stocks, 40% bonds).
· Monitor Your Portfolio: Regularly review your portfolio to see if the actual allocation has deviated from your target.
· Rebalance: If the allocation has drifted, sell some of the over-weighted assets and buy more of the under-weighted ones to bring your portfolio back to its target allocation.
Example
Imagine you have a portfolio with a target allocation of 60% stocks and 40% bonds. Over time, the stock market performs well, and your portfolio shifts to 70% stocks and 30% bonds. To rebalance, you would sell some of your stocks and buy more bonds to return to the 60/40 allocation.
Because stocks saw a relatively large advancement last year, the chance of being overweight in the riskier asset class is there. I’ve already reached out to several of you to discuss this. Be prepared for an email or phone call from me to possibly review your portfolios to ensure they align with your goals. We can also adjust for any life changes that have not already been brought to my attention.
2. Continue Saving and Investing. For those of you in your “saving years”, it’s important to consistently invest, even in uncertain times. Remember the “long term plan” noted above and what we’ve discussed.
3. Stay Educated and Engaged. While I do my best to inform, I invite and enjoy answering your questions. Feel free to email me anytime or schedule a meeting to discuss your personal financial plans.
4. Don’t forget to access your “Client Portal”HERE. Viewing your account periodically is a good idea.
While 2024 had its share of challenges, those who stayed disciplined and focused on their goals are better positioned for the future. As your advisor, I’m here to help you navigate what’s ahead in 2025 and beyond.