SMART MOVES TO MAKE BEFORE YEAR-END

There’s still time to save money and shape up your personal finances before the clock strikes 12 on New Year’s Eve.

1 Tune Up Your Portfolio

ADD REBALANCING TO YOUR ANNUAL TO-DO LIST

Thanks to a bull market in stocks that has stretched deep into its second year, stocks have trounced bonds since March 2020, when the relentless climb began. As of early October, the S&P 500 index has more than doubled, compared with a 4.2% return for U.S. bonds, as measured by the Bloomberg U.S. Aggregate Bond index. But there’s a potential downside to the big rally: Many investors might be holding a bigger stake in stocks than their risk tolerance calls for. And that could make portfolios more vulnerable to a stock market downdraft.

There’s an easy fix: Rebalance your portfolio to get your asset weightings back in line with your desired allocation. “Rebalancing prevents you from taking unintended risks,” says Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

Start by tallying up the total dollar value of the stocks, bonds and cash you hold in your taxable and retirement accounts. If you own a fund that invests in both stocks and bonds, such as a balanced fund or target-date fund, review the fund’s latest holdings to see how much it holds in each major asset class. To find out your current asset mix, calculate the percentage of each asset class relative to your total portfolio. For example, if you have a $1 million portfolio and $750,000 is now held in stocks, your equity stake is 75%.