With the new year on our doorstep, now is the time to reassess your investment portfolio and potentially realign your strategy for the upcoming year. Whether you’re a brand-new investor or an experienced trader, we have put our collective minds together to help you prepare for all the potential ups and downs of 2024.
From setting goals to identifying key market trends, here is a look at some factors to consider when fortifying your investment strategy for the year ahead.
Set your goals for the year ahead
Setting clear investment goals for the upcoming year is a key step every investor should put time into. These targets will act as guideposts for the next 12 months, helping you align your investing strategy with your financial objectives and long-term aspirations. Whether you want to hit some specific short-term goals or concentrate more on wealth generation over the long term, putting your goals down in writing can help illuminate the path ahead.
Most investors have a mix of long and short-term goals. Short-term goals may include capitalising on immediate market opportunities or generating passive income through dividends, while long-term aspirations might revolve around retirement planning or funding major life events.
Setting up these goals isn’t a one-time task – they can, and should, evolve over time. As your financial situation or risk tolerance changes, so will your investment goals. Regularly revisiting and refining your goals will ensure they remain relevant and reflect your current priorities.
For a comprehensive understanding of setting investment goals, our guide delves deeper into the nuances of defining effective investment objectives.
Do your research
Doing your due diligence with plenty of research will help you most on your investment journey. Only by understanding market conditions can you determine the best timing and assets to invest in. Market analysis can also help mitigate future risks, as you can identify emerging opportunities and tweak your investment strategy to suit.
Bear in mind that the Australian market has its own unique dynamics, which do not always mirror global markets. That being said, while having a grasp of local economic conditions is a smart move, staying across international events is equally important. Global market trends can influence Australian assets, making it crucial to consider domestic and international factors when researching stocks and other assets.
Ensure you stay informed about market trends, economic indicators, geopolitical shifts and industry-specific developments. This level of awareness will make you a more adaptable investor and help you adjust your investment portfolios in response to changing market dynamics.
Assess your asset allocation
Regularly reviewing your asset allocation is fundamental to building a resilient portfolio for years to come. Diversification across different asset classes, such as stocks, commodities and real estate, can help reduce your level of investment risk, particularly when the market is turbulent. It spreads your investments across multiple assets and, therefore, minimises the impact of a downturn in any single sector or asset.
To create a well-diversified portfolio, you’ll need to:
- Invest in assets with low correlation.
- Balance risk and return by diversifying across industries and geographies.
- Regularly rebalance your portfolio to maintain desired allocations.
You can learn more by exploring our guides on building a diversified portfolio and managing risk.
Consider rebalancing your portfolio
Rebalancing isn’t as complicated as it sounds. It simply means realigning your portfolio to its original or updated target asset allocation. This can help you better manage risk while ensuring your investments align with your risk tolerance and goals.
Several methods can be used to rebalance your portfolio:
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Time-based rebalancing:
Regularly scheduled, such as quarterly or annually, regardless of market conditions.
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Threshold-based rebalancing:
Triggered when specific asset classes deviate from their target allocation by a certain percentage.
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Cash-flow rebalancing:
Adjusting the portfolio by reinvesting dividends or adding more funds.
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Opportunistic rebalancing:
Capitalising on market trends or changes to adjust the portfolio strategically.
Rebalancing can prevent overexposure to high-performing assets and help you take advantage of opportunities in underperforming ones.
As you prepare to start another year anew, refining your investment strategy should be at the top of your to-do list. Remember to tailor your portfolio to your current objectives and always stay across what’s happening in the markets – locally and internationally. By being a more diligent investor this year than the last, you will be in a better position to navigate any fluctuations that might affect your portfolio in 2024.
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This communication is general information and education purposes only and should not be taken as financial product advice, a personal recommendation, or an offer of, or solicitation to buy or sell, any financial product. It has been prepared without taking your objectives, financial situation or needs into account. Any references to past performance and future indications are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication.