It’s almost 2026, and soon you’ll be receiving your year-end statements for all your investment accounts. You’ll also hear a lot of advice about reviewing and rebalancing your portfolio in January. Robert Brokamp and Certified Financial Planner Sean Gates how to do it and how much re-arranging is necessary. Also in this episode:-Why Schwab expects a “vibesession” in 2026-Why inflation feels worse for many Americans-Debunking a myth about the relationship between retirement and life expectancy-Spend money, and get reimbursed for those expenses, from flexible spending accounts and 529s before the end of the year Host: Robert BrokampGuest: Sean GatesEngineer: Bart Shannon Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What should you consider when reviewing and rebalancing your portfolio?
So soon be time to review and perhaps rebalance your portfolio. But how should you do it? That and more on this Saturday Personal Finance edition of Motley Fool Money. I'm Robert Brokamp, and this week I speak with financial planner Sean Gates about how to evaluate and perhaps adjust your portfolio as we prepare to enter a new year.
But first, let's highlight some insights from some recent publications. You know, it's a time of year when many financial services firms issued their 2026 outlooks. Many are available, and I find them all interesting, but I'll just highlight a few takeaways from the recent publication of Schwab's Outlook for Stocks and the Economy, co-written by Lizanne Saunders and Kevin Gordon.
One of the themes of the report is the ongoing K-shaped economy, so-called because the divergence in fortunes between higher-income Americans, who are doing pretty well,
Chapter 2: What insights can we gain from Schwab's 2026 economic outlook?
and lower-income Americans who are struggling due to affordability challenges and job uncertainty. The economy next year will continue to be in what Schwab calls a vibe-pression, a dour consumer sentiment while GDP continues to grow.
To illustrate this, the report cited an unprecedented divide between increasing unemployment expectations per the University of Michigan's Consumer Sentiment Survey, which tends to survey more working-class respondents with, you know, kitchen table concerns,
and the unusually upbeat outlook for the stock market from the Conference Board Consumer Confidence Survey, which tends to have more higher income respondents. As the report stated, quote, the result is a split personality and confidence textbook K, end of quote.
One reason the economy may continue to grow despite this vibe oppression is the stimulus from the one big beautiful bill passed in July, which is projected to add 0.7% to GDP in 2026 and close to that in 2027, but at the cost of accelerating borrowing from Uncle Sam.
Chapter 3: How does inflation impact household budgets and spending?
The Schwab report estimates that the percentage of federal debt to GDP will rise to more than 125% over the next decade, whereas it would have been just, and I put that just in air quotes, a bit over 115% without the bill. One other tidbit from the Schwab report, the second year of a presidential term is usually the weakest for the stock market.
Since 1928, the second year is profitable 54% of the time compared to an average of 67% for all four years with an average return of 3.3%. For our next item, we'll continue on the theme of inflation with a recent MarketWatch article from Alicia Munel of the Center for Retirement Research at Boston College. According to Munel, prices have risen 25% in total over the past five years.
However, the three biggest items in most household budgets, housing, transportation, and food, have risen more. Incomes, meanwhile, have risen 27%. So while wages may have been keeping up with overall prices, Minal writes that, quote, standing still is not enough.
Chapter 4: What myths exist about retirement and life expectancy?
Most would like to see their standard of living improve over a five-year span. Thus, they feel like they're falling behind. End of quote. And now the number of the week, which is 67.8. That was the average age of death of Boeing employees who retired at age 65, whereas employees who retired at age 55 lived to 83. In other words, retire sooner, live longer. There's only one problem.
It's not true. These stats come from a graphic that has been passed around the internet for a long time, including recently, but it was debunked more than 20 years ago. Retirement expert Michael Finca recently wrote an article about it for the website ThinkAdvisor, and with the help of fellow researcher David Blanchett, looked at the actual relationship between retirement and life expectancy.
Using the University of Michigan's Health and Retirement Study, they looked at the retirement status of participants in 2012 and what percentage were still alive a decade later. However, it's important to take health into account because many people retire sooner due to health issues, which can also result in them dying sooner.
So Finca and Blanchett also factored in the participants' self-assessed health status, which is actually a surprisingly good predictor of how long people will live. The results were the complete opposite of that made-up graphic about Boeing employees.
Chapter 5: How can you effectively analyze the health of your portfolio?
Finca and Blanchett found that people who continued working lived longer than those of the same age who had retired. The difference was the largest for those in fair or poor health, but even workers in great health were more likely to live longer than healthy retirees. Next up, how to analyze the health of your portfolio when Motley Fool Money continues.
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It's almost 2026, and soon you'll be receiving your year-end statements from all your investment accounts. You'll also hear a lot of advice about reviewing and rebalancing your portfolio in January. But how should you do it? And how much rearranging is actually necessary? Here to give his take is certified financial planner, Sean Gates.
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Chapter 6: What strategies should you use for portfolio rebalancing?
Welcome back to the show, Sean.
Hello. This is an easy podcast. Just put everything in gold and go away for a while.
Well, we made good to that. So you and I have been friends and colleagues for over a decade. So I know you're a successful investor yourself, right? You're a fellow in your 40s. You're a financial independent. You only work because you want to, not because you have to. But you've also been in the financial services industry for almost 20 years.
So how do you go about reviewing portfolios for yourself and for your clients?
Yeah, this is a fun topic. It's tricky because you get investors of all walks of life who don't really know what they're trying to accomplish. And I would say that's the foundation of rebalancing, right?
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Chapter 7: How important is benchmarking your portfolio against indices?
What is your target allocation? Because if you don't have a target, you don't know what to rebalance towards. The target allocation is usually a function in the old school world, we'd call it the investment policy statement, but really it's just a document or a guiding ethos on where you want to go. So a financial plan could be a decent investment policy statement.
And it's to say a combination of what is your risk capacity and risk tolerance and back into that target allocation. Is it 60-40 like a traditional mix, 100% equity? all cash. Those are how you would back into your target allocation. And then you get into the rebalancing.
When you talk about risk tolerance, we are at a point now where the market is at all time high. The market has done very well over the last five or 10 years. There have certainly been some speed bumps, but I think people are feeling pretty good about portfolios. Do you take that into consideration when you talk to a client and you're like, maybe you should dial it back.
You may feel pretty good right now, but you may be feeling good because the market is doing well.
Yes, I would say, you know, valuations is something to consider when you're thinking about rebalancing, right? If we take a step back on the overall rebalancing process, right, there's typically two ways to do it, one based on time, and one based on certain measurable metrics, usually a percentage drift, but it could also be one of valuations, it could also be one of
overall market sentiment, like Fed cutting interest rates, like unique market events. And so I do think you should take those into consideration, but you have to go through a lot of education for someone to help guide them on where their rebalancing or target allocation should be. One chart that I think you and I are very fond of, I know me and Megan are very fond of, is the Quilt chart.
So the Quilt chart is a very common chart that shows which asset classes have done the best on a year-by-year basis, stacked over one another. So you could look at 2024 and see that gold did very well that year, you know, up 20%, but then bonds were negative 5%. And a well diversified portfolio is usually going to fit somewhere in the middle of that quilt chart.
And that ties back to the risk tolerance, right? Or as an investor, do you want that sort of smooth portfolio? return profile with less magnitude of drawdown or less volatility? Or do you want to target some of those asset classes that can give you a juiced rate of return, but higher amount of volatility?
And then you could always tie that to your point around certain market events, certain valuations. Maybe you're paring back the aggressive stuff when valuations get high, and you could incorporate that in your yearly rebalancing or semi-annual rebalancing conversation.
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Chapter 8: What year-end financial planning tips should you know?
At the same time, if you're investing, you have to have some measurable guide on the underlying performance of the component parts, right? And so then benchmarks become relevant. If you're in a target date fund in your 401k, and that target date fund is a stinker compared to all other target date funds, That matters on a micro level, and you should be able to adjust with that informed decision.
But to your point, most people have gotten accustomed to benchmarking everything against the S&P 500. And that gets really dangerous because people are getting over their ski tips in terms of risk taking because everyone thinks you can just put everything in the S&P 500. Look, it's done 10% every year. And that's not appropriate for your level of risk or your goal set, right?
And a lot of people are better off if they ride that smooth middle of the road quilt chart because they might make bad investor decisions on their wealth if they see volatility in the future.
To get it this time, I think it's challenging to benchmark your portfolio against the S&P 500 because it is basically been the asset class of choice over the last five, 10 years, right? US large cap stocks have outperformed just about everything.
So if you had international, if you had small caps, if you had value, and of course, if you had cash and bonds, that was a drag on your portfolio, but that doesn't mean it was inappropriate for your situation.
So I think that's important context, because if you do benchmark the S&P 500, you're probably going to not look so great if you had a well-diversified portfolio, but it still might have been the right choice for you.
Correct. Yeah. And, you know, it gets very tricky, especially if you are paying someone to manage your money. because you can blame them for not competing against the S&P 500. And then you get in this place where a version of rebalancing that you do is shopping money managers. So you fire one money manager who has failed to meet their benchmark and you go put it with someone else.
And it's a version of chasing performance and you can trap yourself in that way. I would argue that, you know, that the S&P 500 While it's done very well, if you look at this year, international stocks have crushed it and gold has crushed it.
So finally, we are starting to see where people who have just hitched their wagon to the S&P 500 are finally recognizing that other asset classes can help their portfolio. Is this a unicorn year, an outlier for one year? Perhaps, but again, it just shows you in that quilt chart or stacked ranking asset class visual that sometimes you have to have other component parts to power your portfolio.
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