For many American households, the fourth quarter is an especially busy time of year. The holidays can have a significant impact on both vacation plans and household finances, with many families anticipating additional financial stress during the holiday season.
Waiting Too Long to Tackle Year-End Financial Planning
Some of this fourth-quarter financial anxiety stems from calendar year-end deadlines that many people wait too long to address.
Required minimum distributions, charitable contributions, gifting strategies and tax-loss harvesting are all financial planning matters that are best handled well before the final weeks of the year.
If you’re prone to procrastination, remind yourself that the holidays are more enjoyable when you have fewer financial matters hanging over your head.
Holding Losing Stocks Too Long and Selling Winning Stocks Too Early
Tax-loss harvesting is an area where mistakes can be rooted in more than procrastination. Tax-loss harvesting involves strategically selling investments at a loss to help offset capital gains from profitable investments, potentially reducing the amount of capital gains tax owed. Investors should also consider the wash-sale rule, which can disallow a loss if they purchase the same or a substantially identical security within 30 days before or after the sale.
More recent research continues to document what behavioral-finance experts call the “disposition effect” — the tendency for investors to sell investments that have gained value too quickly while holding onto losing investments for too long. A 2022 study examining investor behavior found that investments held at a loss were sold more slowly than those held at a gain.
Rather than holding onto a poorly performing investment in the hope that it will eventually recover, remember that the tax code may provide a benefit when investors realize those losses, allowing them to offset capital gains.
Attempting to Chase Performance
Another behavioral bias that can emerge in the fourth quarter is performance chasing. Investors may gravitate toward investments with the strongest recent returns, often at precisely the wrong time. Morningstar’s 2026 Mind the Gap research found that over the 10 years ending in 2025, the average dollar invested in U.S. mutual funds and ETFs earned 8.7% annually, compared with a 9.9% annual return for the funds themselves. The difference reflects the timing and magnitude of investors’ purchases and sales, including behaviors such as chasing recent returns.
Resisting the urge to chase performance isn’t easy. One way to avoid this mistake is to ask yourself whether you would still be interested in an investment if its recent performance had been significantly worse. Instead of focusing primarily on past performance, prudent investors should consider the underlying fundamentals and whether an investment is appropriate for their financial plan.
Trying to Time the Market
Many investors may talk themselves out of staying invested in the market despite historical data showing that the fourth quarter has been the strongest-performing quarter for stocks. Financial stress can also trigger an emotional impulse to reduce risk, particularly when doing so allows investors to lock in gains.
While it’s easy to understand the appeal of avoiding stock-market drawdowns, attempting to time the market can carry a significant cost. Fidelity’s 2026 analysis found that a hypothetical $10,000 investment in the S&P 500 held from 1988 through 2025 would have grown to approximately $616,000, while missing just the five best market days would have reduced the ending value by roughly 38%.
Before moving a significant portion of a long-term portfolio to cash, consider the opportunity cost of missing a market recovery and whether the change still aligns with your goals and risk tolerance.
Failing to Focus on the Big Picture
The fourth quarter is an ideal time to review your financial plan and assess progress toward your goals. Without a deliberate effort to make time for financial planning, however, these important tasks can easily take a backseat to holiday shopping, travel, family commitments and other seasonal activities.
Staying on top of financial planning isn’t intuitive for most people, and the fourth quarter provides plenty of opportunities to become distracted or put important decisions off until later.
If you’ve ever felt that your financial peace of mind could use an upgrade during the holidays, consider working with a CFP® professional who can help keep your financial plan on track and look out for your best interests when life gets busy.
Get started on securing your financial future today
Find a CFP® professional