by FPA member, Jeanne Gibson Sullivan, CFP®
Last Updated: September 18, 2012
September is always good time to start preparing your portfolio for the winter. In addition, because this year is an election year there are many prognostications about anticipated changes in the economy or tax rates that may (or may not) occur that could help or hurt portfolios. Some investors react to the onslaught of information and predictions of dire consequences by avoiding their portfolio altogether, others respond by making drastic changes in their portfolios. As always, a calm rational approach to investing is the prudent approach. Markets will go up and down, tax rates will change over time, investing is for the long run. There are some simple tips that can help portfolios before the end of the year no matter what happens.
- Rebalance your Portfolio – Now is a good time to check your allocation and make sure your portfolio is balanced the way you intend. If your intention was a portfolio that is 60% stocks/40% bonds and you haven’t checked your allocation in a couple of years, you may be overweight in stocks. Rebalance and align your portfolio with your objectives.
- Pay attention to tax efficiency – In your taxable account, include investments that are tax efficient. Check 1099’s from the past few years to see which mutual funds paid out large distributions. If you still want to hold that investment, consider investing in a tax sheltered account, such as an IRA. Pay attention to both the capital gains of positions you hold as well as year end mutual fund distributions when rebalancing your portfolio, so there are no tax surprises as you are making changes.
- Retirement Accounts – if you are still working, evaluate how much you are contributing to retirement plans and make sure you contribute your intended amount by the deadline (some deadlines are the end of the calendar year, some are later). If you must take Required Minimum Distributions, make sure those also are completed.
These simple steps will help keep you organized and help keep your portfolio invested according to your long-term objectives.
Jeanne Gibson Sullivan, CFP® is an FPA member and a financial planner. She is the founding principal of Financially in Tune in Wakefield, MA.
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