Taking stock of your finances at the beginning of a new year might be an excellent chance. An annual review is an excellent opportunity to reassess your assumptions and fine-tune your portfolio if necessary. It is a good idea to do this whether you are completing the review on your own or with the assistance of a financial advisor.

Considering the challenging year that investors went through in 2022 and the challenging economic conditions that will continue to characterize 2023, the following are six points that may assist you in maintaining your portfolio's current trajectory in light of these challenging circumstances.

Continue to invest, and do not deviate from your goal

Maintaining your self-discipline is the first and most important step. According to several studies, the emotional impact of a loss is much greater than that of an equivalently sized gain in terms of intensity. So, the decline in global markets over the previous year may have been very upsetting for many investors.

But you should not break from your strategy at this point. If you believe these losses might worsen before they get better, it may seem counterintuitive to keep investing money while market values are decreasing. This is especially true if you believe that the market will eventually recover. The rise in interest rates may make holding cash seem to be a more attractive investment option right now.

But, it is essential to remember that, historically speaking, stocks have been one of finest long-term hedges against inflation. In contrast, real returns on cash investments are likely to be negative after accounting for the eroding effects of inflation.

When you remove yourself from the market, you risk locking in losses and missing out on large gains that may have brought you closer to achieving your investment objectives. Even a brief absence from the market might result in significant financial losses. For illustration purposes, the United States stock market had more than 23,300 trading days between 1928 and 2021. The thirty days with the greatest trading activity were responsible for roughly half of the total return from the market.

Consider rebalancing your portfolio

However, maintaining one's path does not necessitate maintaining one's status quo. Due to the significant shifts that have taken place in the financial markets over the last year, it is possible that the proportion of stocks and bonds in your portfolio no longer corresponds to what was intended when it was first constructed.

According to research, the diversity of your assets is the factor that will most likely influence the success of your long-term investment strategy. Because of this, it is essential to ensure that your mix of assets is optimal and make necessary adjustments regularly. This process is referred to as rebalancing.

Certain all-in-one multi-asset funds, automatically handle this. On the other hand, if your portfolio comprises a variety of funds, you could be required to do this task manually.

Reassess your goals and risk tolerance

Have your ambitions changed in any way? Is the strategy you have still applicable to the goals you have set? A bad year of results on investments is insufficient justification for adjusting your portfolio; however, a shift in your personal circumstances or aspirations may be. This might lead to a change in your asset allocation, for example, if you have been able to speed up the completion of some of your objectives or if you believe that you need to push back the completion of others.

Do you invest consistently and do you invest enough?

Consider whether you are putting enough effort into achieving your objectives. Would you, for instance, have a better chance of reaching your financial goals if you established direct debit and monthly investment plan rather than investing in a haphazard fashion with ad hoc lump amounts whenever the whim struck you? And if you are planning for retirement, how will the growing cost of living affect your goal income, and are you saving enough to reach it, even though it is expected to continue rising?

Take a look at your spending

Since expenses play such an important part in the performance of investors, we have found from our research and experience at Vanguard that it is in an investor's best interest to reduce costs to a minimum. Every ten pounds an investor contributes to the fund's expenses, whether for an actively managed fund or an index fund, results in ten pounds less in return.

While it doesn't seem like much, it may significantly impact your financial situation over time. In addition, the proportionate influence an investor's fees have on their overall return will be greater when the market conditions are more challenging.