The ultimate end-of-year checklist for investors

This year has certainly been a good one for diversified portfolio investors. Those who stuck to their long-term plans and stayed in the market have been well rewarded. 

With the end of the year approaching, it's the perfect time to look at your portfolio and ensure you're in the best possible position for the year ahead. 

In investing, doing the little things can make a big difference over time, and as such, here are six investment moves that investors should make before the end of the year. 

1. Check your asset allocation 

The past year has been an incredible one for equities, with the S&P/ASX 200 up 19.0% (23.4% including dividends) for the 12 months to the end of November, and the S&P 500 up 32.1% (33.9% total return) over the same period. 

This is great news for investors, but one small side effect is that it can cause a portfolio to become lopsided towards equities, potentially moving it out of alignment with your risk profile and target asset mix. 

To fix this problem, a rebalance of your portfolio may be needed.  

Some portfolios such as InvestSMART's diversified ETF portfolios are reviewed regularly (by InvestSMART) and then rebalanced if required, so no action by investors is needed. However, if your portfolio isn't automatically rebalanced, then it may be worth trimming a few positions to realign your asset allocation

2. Review your fees 

Like death and taxes, paying fees is a certainty that you can't avoid. However, fees can be minimised, making it essential to review them each year to make sure you're not paying too much. 

You might not be able to control markets but you do have some control over fees, which is why you should look for investments that are high quality but have lower fees.

The size of your fees (including the amount you pay in brokerage fees and capital gains tax), can make a massive difference to your investment nest egg over the long term, so it pays to reduce your fees.

3. Assess your portfolio's performance 

The end of each year is an ideal time to look back and review your portfolio's performance to see how it's tracking. 

With the daily ups and downs in the share market, it can be easy to lose track of longer-term performances. 

The table below highlights the total returns (i.e. growth return plus distribution return) of various broad-based ETFs and provides a good indication of how each asset class has performed as of the end of November 2024. 

Source: ASX Investment Products monthly update, November 2024

As you can see from the table above, returns have varied across asset classes with equities, commercial property, and infrastructure the standout performers for 2024.  

However, as we know, the future can be very different from the past, and that's why it's a good idea to have a diversified portfolio that provides upside when markets are strong, but also offers protection when markets are bearish. 

4. Revisit your investment goals 

One of Stephen Covey's '7 habits of highly effective people' is that you "begin with the end in mind". The idea is that whenever you start a task, you should always have a clear vision of your end goal. 

It's the same with investing. Your goal may be to save for a house deposit or your children's education or have enough wealth for a comfortable retirement. Once you have defined these goals clearly, you can then work out your risk profile and how much you need to save to achieve these goals. 

The end of each year is a perfect opportunity to review your investment goals to ensure you are on track. It can also be a good time to decide if any of your goals need adjusting. Reviewing your investment goals helps you to stay focused on achieving them. 

5. Go over your budget 

With the cost of living rising sharply over the last few years, it's important to have your budget up to date. 

A budget has many benefits, the most important being that it puts you in control of your finances. It shows you the cash coming in and what's going out. A budget can also protect you from overspending and show you where there are opportunities to save. These savings can then provide you with some much-needed financial breathing space. 

It's a good idea to go through your expenses and look for ways to bring costs down. When added together, savings can become quite significant. 

6. Build your knowledge (and enjoy the break) 

It's always important to be continually growing in your investment knowledge, and no matter how long you've been investing, there is always more to learn. 

The holiday period can be a great time to do some investor education. This could be by reading a good investment book, listening to an investor podcast, or even signing up to InvestSMART's Investment Bootcamp. 

One further smart move over the holiday period is to simply relax and enjoy time with family and friends. Taking a break is good for both the mind and the body and is a great way to prepare for what will surely be another big year in 2025.