NerdWallet's Smart Money Podcast - Investing in 2026: Fix Your Allocation Before the Next Market Swing

Episode Date: January 5, 2026

Start your 2026 investing strategy with smarter moves, fewer fees, and less stress when markets get rocky. How should you invest in 2026 if tech stocks keep dominating the market? What’s a smart checklist for leveling up your investing this year? Hosts Sean Pyles and Elizabeth Ayoola discuss diversification and investing tools to help you grow your wealth with a plan you can stick to. Then investing writer Alana Benson joins them to unpack what 2025’s market swings can teach you, how to diversify beyond mega-cap tech stocks (including options like equal-weight funds), and how to choose the right account and platform while keeping fees and taxes in mind. Check out NerdWallet’s Best-Of Awards: https://nerdwallet.com/awards  Want us to review your budget? Fill out this form — completely anonymously if you want — and we might feature your budget in a future segment! https://docs.google.com/forms/d/e/1FAIpQLScK53yAufsc4v5UpghhVfxtk2MoyooHzlSIRBnRxUPl3hKBig/viewform?usp=header In their conversation, the Nerds discuss: stock market 2026, how to start investing, passive investing, index funds, S&P 500, Magnificent 7, AI stock bubble, rebalancing portfolio, asset allocation, stocks vs bonds allocation, long-term investing, market volatility, timing the market, brokerage account, best brokerage for beginners, best investing app, best robo-advisor, Fidelity investing, Interactive Brokers, Wealthfront robo advisor, ETFs, target date fund, robo-advisor, IRA contribution limit 2026, Roth IRA, traditional IRA, SEP IRA, 401k match, 529 plan, college savings plan, and retirement investing. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend. Learn more about your ad choices. Visit megaphone.fm/adchoices

A new year can mean a lot of things, a chance to build better financial habits, you could pick up a new hobby, or just maybe you'll get serious about building your wealth through investing. Investing is the easiest money that I have ever made, Sean. I sleep in my money compounds. It's beautiful. And hey, maybe one day you'll be able to live off that in retirement, or maybe even early retirement, which I know you love. Yes, I do. Welcome to Nerd Wallet's Smart Money podcast, a show where you come to us with your money questions and we, genius nerds, answer them. I'm Sean Piles. And I'm Elizabeth Ayola.

This episode, we're continuing our series all about your money in 2026. Now, over the coming weeks, we'll talk about how you can make the most of your credit cards, home buying ambitions, and so much more. But today, we're all about investing, what the market might do, how you should think about investing to grow your wealth, and the best financial products to help you get there. To help us out this episode, we are joined by NerdWallet Investing with Alana Benson. Alana, welcome back to Smart Money. Hi, guys. Thanks so much for having me. All right. So we're going to look back. Let's look back at investing in 2025 at a high level.

What are the main takeaways? Now, it seems like we had a pretty banner year for the stock market, even after a big sell off in April. indices hit record high after record high. And things are looking pretty good as we're recording this in early December. It was definitely an interesting year. I think 2025 is a great example of a principle that we see all the time and that it's just very, very hard to predict the market. So we started this year with a lot of people talking about a recession and potential down markets. And well, yes, Elizabeth, to your point, we did have a pretty significant dip in April. but the stock market continually set all-time market highs for a lot of the second half of the year. And then Bitcoin also hit some of all-time's highs this year, but then it plummeted around 30% from those highs.

So just because you think you know how it's going to go, you almost never do. And one of the big stories in 2025 was, of course, AI, the companies that make the hardware and software that power this new techno future that we're living in. invidia, for example, was up around 30% for the year as of this recording, and Nvidia has been raking in money, but other companies in the AI space, like OpenAI Sam Altman's company, Aklo, have these massive valuations, but have yet to turn much of a profit, sometimes any profit, and that has many analysts feeling certain that we are in an AI bubble, and at the stock market and our portfolios are in for a rough time if and when it bursts. So, Alana, do you want to to share your two cents on AI's role in the stock market right now and what people can also do to hedge against getting totally blasted if and when this bubble bursts. Well, it's always fascinating when people are certain of something. Yeah, especially with the stock market. Right. So one thing that has been interesting this year is how heavily weighted the S&P 500 now is with a very small handful of tech stocks. So in past decades, if you invested in an S&P 500 index fund,

your portfolio would have been pretty well diversified. Now, the S&P is wading those tech stocks in a way that makes those funds very tech-focused. And I can't really say if and when the AI bubble will or won't burst. To my previous point, I'm never going to try to claim or guess what the market is going to do. But one way you can help protect against volatility is if your portfolio is very tech-heavy, it's to diversify outside of that industry. And there are lots of funds that focus on other industries such as health care, energy, and commodities, and you can invest in those. Yeah, I've seen a number of commentators say that the S&P 500 is almost more of an S&P 7 because of how heavily weighted growth has been among these companies known as the Magnificent 7.

This includes companies like Google, Amazon, and Apple. So if that makes folks nervous about their investments, they might want to look into investing in what's called an equal weight fund, which is a type of fund that invests in all the companies of the S&P 500 equally, regardless of their market capital. capitalization. That can help ensure that you aren't overly invested in just the largest companies. Well, speaking of the Magnificent Seven, a lot of tech companies, particularly those in the AI space, had a great year. But there were, of course, some losers, too, as there usually are, which industries didn't perform as well last year, Alana? And are there any lessons we should

take from that as we start off 2026? There have been sectors that have been maybe underperforming what we would like to say the benchmarks are over the last year. And I'd say things like energy and real estate may have lagged other industries. But again, I really don't think we should put too much stock into that and say, I know it's the worst joke ever. We can't say, you know, oh, these sectors didn't do well. I should sell my stock. That's kind of the exact opposite response to have, especially if you're investing for the long term. If you're actively trading, sure, you can look at those details more carefully, but for retirement investors, I just don't think it serves you to really be concerned about that. Well, according to Nerdwallis' 2026 Consumer Outlook

survey, over 30% of respondents expect the stock market to improve in 2026. So, Alana, let me ask you the most annoying question that I can pose anyone in your position. What do you think is going to happen to the stock market this year? I assume you have your crystal ball or tarot cards or bag of bones ready to help you predict the future here. You know, I never doubt the power of tarot cards, so I'm just going to go with that. But like I said, I know that trying to guess at the market is a losing strategy, it's been proven over and over again by professionals and amateurs and studies. Active investing over the long term simply underperforms the market.

The best thing to do is to have a well-diversified portfolio and not mess with it and just let it grow over time. It's boring, but it's true. And I'll tell you I love boring when it comes. to my investments. Can you talk to us, Alana, a little bit about how you're approaching your investments this year, especially since you can't tell us what's going to happen in the market. Are you sticking to your passive investing strategy or are you mixing things up in 2026? Nope. I am staying boring. My personal investing approach is unbelievably passive. I practice what I preach.

I have a mix of different funds and I just try to not look at them too much, especially during volatile times. Now, I may buy a few industry-specific funds to add some diversification away from tech stocks, but otherwise, my strategy just stays the same from year to year. Pretty much the same here. I use robo advisors. I have a good target date fund for my retirement account, and beyond that, I try not to sweat it too much. All right, well, we're back with more about investing in 2026 in a moment. Stay with us. All right, Alana. Now, let's turn to what? what people can do with their own investments this year. So let's say someone is looking to level up

their investment game in 2026. What should they be looking into? Now, with the caveat that, of course, we are not our listeners, investment advisors, and this is not personalized advice. Yes, we're saying it again in 2026. Yes, well, thank you for that caveat. I think it's a good idea to run through a short checklist to make sure you're just doing the most with your money. So first, make sure you're investing in the right places and you're not leaving money on the table. And that would be things like making sure you're getting your 401k match if you have one offered through an employer, contributing to an IRA in whatever amount you can, or increasing it if you get a raise this year. And if you can contribute the maximum amount, keep in mind that the IRA contribution

limits are increasing from $7,000 for 2025 to $7,500 for 2026. And for those, age 50 and older, the catch-up contribution is 8,600 in 2026. So, for example, if you had a child recently, it may be a good idea to look into opening and contributing to a 529 college savings plan. So think about how your life has changed or will change this year and factor that in. And you may want to consider doing some annual rebalancing as well. So say you're invested in 90% socks and 10% bonds. And that's like a fairly aggressive portfolio, which is typically suited to someone with years and years before retirement. And we're all getting older. So maybe it's time to check in on that allocation and rebalance it to say 85% stocks and 15% bonds. So the specifics

of that will really depend on your personal situation and your risk tolerance. And if you're not sure how to do that, you can look at a target date fund and sort of see those examples as they're tied to age. Or you could talk with a financial advisor. Sometimes when I talk with newer investors, They'll be really hyped about investing in one specific company, usually one they have some kind of personal affinity for, or they'll buy a bunch of stock in that one company or something that they heard about from a friend, and they'll try their hand at active investing, bordering on day trading, you know, buying and selling stocks that they're trading Pokemon cards, basically.

Both approaches can come with risk and potentially unpleasant tax bills. Alana, you already mentioned how active investing can be a losing strategy, but can you talk a little bit more about the tax side of things, since I don't think a lot of folks have that on their mind as they're writing that dopamine rush of active investing. I completely agree, and I'm so glad that you brought up tax bills. So if you open an investment account on an app, it can be really fun and easy to just buy and sell stocks quickly. But you do need to keep in mind that you'll likely need to pay taxes on the gains that you make from those sales. So it's a good idea to set up a system for yourself if you're selling stocks throughout the year. So make

sure you know how much tax you're going to need to pay on the profit and then set that aside so that you actually have the money when it comes time to pay your taxes. Now, I know a lot of people like to invest with their employers, like in 401Ks, for example, but if people want to start investing more on their own outside of their retirement accounts, they're going to need some kind of investment account, right? And choosing the right one can be a really confusing process. What tips do you have for people looking to just get started with investing on a platform that's trustworthy and also very important has minimal fees. Definitely. And I love talking about this because we just finished up our review season where we look at all of the brokers and we grade them. So I think people

should really start from a place of asking one, what type of investment account do I need? And two, do I want to pick and choose my investments myself or have it managed for me? Rather than, oh, this app looks really cool and I should use it. So not every broker offers every type of account. And if you don't want the stress of managing your investments, you don't have to. Like, you don't have to even worry about that. So, for example, say you do your research and you figure out that you want to invest in a Roth IRA, and then you decide that you want it managed for you by a robo advisor. That will help you narrow your search because not every robo offers management for our IRAs.

Or maybe you're self-employed and you want a SEP IRA. So there's only a handful of robo advisors that actually offer that. And then, you know, maybe you want to trade actively within a standard brokerage account and you want to learn more about advanced trading strategies. Some brokers have really good educational materials that can help you figure out how to do that. So think about account type first and then management style. And then you can move on to the actual features that you want. And on each of our broker reviews, we have a really handy table that we call the at a glance table. And that can help you compare those features. Well, that's a good segue into NerdWallet's best of investing

products for 2026. Alana, your team pours loads of hours into researching myriad investment products and using your independent editorial judgment to determine which are the best. So can you talk with us about how you approach this process and what actually makes the product the best in the investing space? Yes, you are correct. We spend a crazy number of hours going over this and it just becomes our life for a big part of the year. So we do spend a lot of time looking at each product, but we also spend a lot of time testing it. And we have a gigantic spreadsheet that acts as a rubric so we can compare all the products against each other. And we look at tons of factors. We do look at fees and account minimums. We look at what types of investment you can

get access to. But we also download the apps. We check out the trading platforms and we see how they function. And of course, the best product we come up with may not be the best product for you, but we try to highlight several that will serve most people really well, and then call out unique features, such as access to financial advisors or IRA matches. Shout out to Alana and the investing team. A fun fact, I did used to be on the investing team, and I did used to be, like Sean said, spending loads of hours doing that. So it was a lot of work. Don't you miss it? No, I can't say that, my boss, I'm listening. All right. What about the winners of Lana? Can you list a few of the best of winners in 2026? And tell us what makes them the best. Yeah, of course. So once again,

Fidelity won as the best for beginners and the best investment app. I really can't say enough great things about Fidelity. I even use it myself. I have to work pretty hard to come up with a downside for it. I believe that Fidelity should serve most investors really well. It has advanced features, but the app is super intuitive enough for where, if you're a beginner, you won't really get bogged down. Interactive brokers, one for best for advanced investors. So this platform has a ton of great features and advanced charts and all kinds of data. So if you're into a higher level of investing than passive investing, interactive brokers could work really well for that. And Wealthfront is our winner for the best robo advisor, specifically for portfolios because it offers

tons of ETFs from a lot of asset classes. It has a lot of customization and an automated bond portfolio. So it really depends on what you're looking for to figure out which of these winners will actually be the best one for you. Alana, some final words of wisdom for those hoping to grow their money through investing in the year of 2026. I'd just say meet yourself where you are. And if you're thinking about getting started with investing, just do it. just rip the Band-Aid off. And I know it's scary, and a lot of people have either emotional or stressful hang-ups when it comes to putting their money in the market.

But it is one of the best ways that you can take care of your future self. That's always solid advice. One thing I'll add on to that is if you have any doubt about the power of investing, play with Nerdwallis investing calculator. You can see how much your money can really grow over time. It can make this an easy decision to get started investing. Well, Alana, thank you for coming on and sharing your insights as we have another year of hopefully wonderful,

powerful, powerful investing ahead of us. Yeah, thanks for having me. And listeners, we would love you to check out NerdWallet's Best of Awards. You can check it out at nerdwollet.com slash awards. And that's all we have for this episode. Join us next time as we continue our series about your money in 2026, where we'll go deep into the housing market,

including what steps you'll need to take to buy a house this year. Follow smart money on your favorite podcast app that includes Spotify, Apple Podcasts, and IHeartRadio to automatically download new episodes. And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes may not apply to your specific circumstances. This episode was produced by Tess Bigland. Hilary Georgie helped with editing. Nick Kersimi mixed our audio and a big thank you to NerdWallet's editors for all of their help. And with that said, until next time, turn to the nerds.