Financial review | Investments at the year's end | Fidelity (2024)

Key takeaways

• Evaluate your progress toward any specific goals.
• Check your mix of stocks, bonds, and short-term investments.
• Evaluate the performance of individual investments against benchmarks.

"Am I investing the right way for my situation?" It's a source of anxiety or confusion for many investors in the best of times.

Consider our simple 3-step checkup plan to help find out.

1. Focus on your goals

Why are you investing? You may have some longer-term goals, like retirement, and some shorter-term goals, like buying a new car or a house. The time frames around your goals, along with your tolerance for risk and your financial situation, will help determine your investment strategy. If you have a goal that is a long time away, like saving for a child's education or saving for retirement, short-term ups and downs in the market have historically turned out to be blips over the long term.

Let's start with saving for college as an example for determining how much you may need to save and invest. Say you envision sending your newborn to an in-state public school and plan to cover half of the expenses with your savings (with the remaining half to be covered by a combination of scholarships, grants, and loans). For the 2022-2023 tuition year, the estimated average annual cost for a 4-year, in-state public college is $23,250.¹At that tuition rate, using Fidelity's college savings calculator(which factors in future inflation), we estimate you would need to save $220 per month over 18 years to be able to cover half of the total 4-year tuition amount.²Saving less per month would require a longer period of time over which to save—or a higher rate of return, which you can't always count on.

What about retirement savings? For a 25-year-old aiming to retire at age 67, Fidelity would suggest aiming to have saved 1x (one times) your salary by age 30. By the time retirement hits, we estimate you should have amassed 10x your salary.³

Here's an example—if you earn $100,000 per year as a 67-year-old, 10x your salary means you would aim to save $1,000,000 by retirement at age 67.

To learn more about Fidelity's retirement guidelines, read Viewpoints on Fidelity.com: Retirement roadmap

can help you see if your savings are on track for your goals and help you come up with a strategy if they're not.

2. Check your asset mix

Year-end is a good time to check if your investment mix still lines up with your risk tolerance, time frame, and goals.

A diversified portfolio is made up of different types of investments with varying patterns of risk and return—like stocks, bonds, and short-term investments. If one part of your investment mix is declining, another part may be doing well, or at least not going down as much. The goal of diversification is not necessarily to maximize performance, the practice is designed to help reduce the volatility of your portfolio over time.

Ensuring that your mix of investments continues to reflect your chosen level of risk—and that the level of risk is still appropriate—is an important part of the review process. Market moves, for instance, can mean more stocks, and risk, or less than you had planned. Or you may find your allocation to bonds has strayed away from where it should be.

Check your asset mix at least once a year to help keep it on track with your objectives. If your goals change significantly—or after big moves in the market—review your investments. If your investment mix has drifted significantly from your target mix of stocks, bonds, and short-term investments (for example, by 10% or more), consider rebalancing your portfolio to your initial target mix.

A good rule for rebalancing is to first confirm that your mix is still right for you. Then if it is, consider directing more of your contributions into the asset classes that have lagged behind and reduce purchases of those that have appreciated. Consider bringing your portfolio back to the target asset mix at least annually—the habit of doing so will allow you to maintain your portfolio in a disciplined way.

Read Viewpoints on Fidelity.com: Give your portfolio a checkup

3. Benchmark individual investments

You should look at your investments to ensure that they are still an essential part of your plan. Evaluate the performance of stocks, bonds, mutual funds, or ETFs by comparing them to appropriate benchmarks. The easiest way to find the appropriate benchmark index is on the stock, bond, fund, or ETF research page found under the News & Research tab on Fidelity.com.

Answer these questions:

Why did you buy this investment?
What role is it supposed to play in your overall plan? Different types of investments play different roles in your portfolio and may provide varying patterns of risk and return. For instance, does it give you more exposure to domestic bonds or international bonds, or does it target a particular style of equity investing, like value or growth?

Is this investment still the right fit for your investment strategy?
If investments in a taxable account have depreciated and no longer fit your strategy, have poor prospects for future growth, or can be replaced with similar investments that play a similar role, selling at a loss can potentially help lower your taxable income.

Investment losses can be used to offset any gains you've realized in 2022, or up to $3,000 of income on a joint tax return. Additional losses can be carried forward to future tax years.

To learn more about tax-loss harvesting, see Viewpoints: How to cut investment taxes.

What is impacting the performance of your investment?
If investments in a taxable account have depreciated and no longer fit your strategy, have poor prospects for future growth, or can be replaced with similar investments that play a similar role, selling at a loss can potentially help lower your taxable income.

Investment losses can be used to offset any gains you've realized in 2022, or up to $3,000 of income on a joint tax return. Additional losses can be carried forward to future tax years. How does it compare to others like it? For instance, what is going on in the world, in the stock market, or in the industry, that affects returns? Keep in mind that different types of investments do well at different times.

Are you considering performance and risk?
Look at how your fund has performed relative to the benchmark index—as well as similar funds. Recent performance shouldn't be your only metric—consider annual performance in the context of fees as well.

Risk is another important dimension—it's important to evaluate the historical risk (variability of returns) associated with a fund's historical return. Risk-adjusted returns can be a useful metric when comparing funds with different levels of risk and/or return. On Fidelity.com, you can find that information on the research page for each mutual fund. Click on the Performance & Risk tab and scroll down to find the section called "Fund risk and return."

How much do your investments cost?
Within a given asset class, category of mutual funds, or among investment products, costs can vary quite a bit. And the amount you pay can impact your overall return over time. Consider expense ratios as you’re evaluating mutual funds for example. If funds from different providers have the similar levels of risk and return, the expense ratio can be an important factor to consider.

Read Viewpoints on Fidelity.com: How to start investing

Get help if needed

Don't get discouraged if it seems like a lot of work—target date funds, target risk funds, and managed accounts are options to consider if you don't have the skill, will, and time to manage your investments.

Target date funds
Target date funds are used for retirement savings goals and offer diversified exposure to multiple asset classes, like stocks, bonds, and short-term investments. The funds gradually become more conservative as they approach the investment goal date.

Target risk funds
Target risk funds also offer diversified exposure to multiple asset classes (including stocks, bonds, short-term investments). Unlike target date funds, the level of risk does not change—they are designed to maintain a consistent long-term level of risk.

Managed accounts
These could be digital options like robo advisors that invest and rebalance for you. Or at the other end of the spectrum, managed accounts could include comprehensive financial planning with a dedicated financial advisor. Note that managed account services do charge fees—purely digital options like a robo advisor typically cost less than full-service advisory services.

Getting help with your investments could keep your portfolio in good shape to achieve your financial goals. Of course, the do-it-yourself approach works too—as long as you have the inclination, skill, and time to invest appropriately for your goals and time frame.

Whether you choose your own investments or pay someone to help you, saving and investing for your goals takes patience and consistency. Try reviewing your savings in the . Seeing your hard work paying off through the years as you get closer to achieving your objectives can keep you motivated and on track.