A Strong Year Is Worth Acknowledging But Not Chasing
By most measures, 2025 was an exceptionally strong year for the stock market. Many portfolios benefited from solid returns, and investors were rewarded for staying invested through uncertainty and volatility.
Still, market performance alone doesn’t define financial success. Strong returns are helpful, but they don’t automatically mean your plan is better aligned, less risky, or more intentional than it was a year ago.
That’s what makes the start of 2026 valuable. Not as a chance to predict what markets will do next, but as an opportunity to step back, evaluate what worked, and make thoughtful adjustments where needed.
1. Rebalance After a Strong Market Year
When markets rise, portfolios often drift. Assets that performed well can quietly take up a larger share of your investments than originally intended.
Rebalancing brings your portfolio back into alignment with your target allocation. It helps lock in gains, manage risk, and reinforce discipline, especially after periods of strong performance.
This isn’t about calling market tops or making short-term bets. It’s about maintaining a structure that matches your long-term strategy, regardless of headlines.
2. Reassess Risk Tolerance
Strong returns can make risk feel easier than it actually is. When markets are climbing, it’s common for investors to underestimate how much volatility they’re truly comfortable with.
Now is a good time to revisit how 2025 felt. Not just the returns, but the swings, the uncertainty, and the moments when confidence was tested.
Risk tolerance is behavioral, not theoretical. It’s shaped by experience, emotions, and real-world reactions, not just questionnaires. Making sure your portfolio reflects your true comfort level helps you stay committed when conditions inevitably change.
3. Review Tax Strategy After Market Gains
Strong markets often come with tax consequences. Capital gains, distributions, and changing income levels can all affect your overall tax picture.
This is where proactive planning matters. Strategies like tax-loss harvesting, thoughtful asset location, and timing of income or deductions can help manage exposure over time.
Most importantly, investment decisions and tax strategy should work together. Reviewing them in isolation can create missed opportunities or unintended outcomes.
4. Make Sure Cash Has a Purpose
After uncertain periods, many investors find themselves holding more cash than they intended.
While having liquidity can provide peace of mind, excess idle cash can quietly erode purchasing power over time.
Start by separating true emergency reserves from cash that doesn’t have a defined role.
Emergency funds are essential. Beyond that, cash should support flexibility, upcoming goals, or future opportunities.
If cash is sitting without a clear purpose, it may be time to revisit how it fits into your broader plan.
5. Re-Anchor the Plan to Life Goals
A new year is a natural moment to revisit what your financial plan is actually supporting.
Retirement timelines, lifestyle priorities, family considerations, and legacy goals can all evolve.
Markets are tools, not the objective. The purpose of investing is to support the life you want to live, not to chase performance or react to short-term narratives.
Keeping your plan anchored to your goals helps ensure decisions stay intentional, even when markets are noisy.
Looking Ahead
2025 created opportunity. 2026 is where strategy matters.
A strong market year can be a gift, but only if it’s followed by thoughtful planning and alignment. Taking time to review your portfolio, risk exposure, tax strategy, cash positioning, and goals can help ensure your financial plan remains clear, balanced, and intentional.
If you haven’t revisited your plan recently, the start of the year is a natural time to do so, whether on your own or through a conversation with a trusted advisor at Babin Wealth Management.