Investors should consider four key questions for a year-end portfolio view, including portfolio rebalancing and retirement contributions.
The end of the year is always a good time for a personal reality check, not to mention a portfolio check.
It’s been an eventful year, as usual. The American economy forged ahead and the U.S. equity market extended its bull run. Now, what about your year-in-review as an individual investor? Let’s pose the question this way: Fast-forward 12 months and pretend you’re taking stock on your 2015 – did you hit your targets? What might you have done differently?
Here’re four key tasks to consider before we flip the calendar. Most of these can be accomplished quickly, but could make a big difference over a lifetime.
This refers to the periodic process of realigning dollar weightings of a portfolio’s assets, buying this and selling that to maintain a desired allocation target – say, 50% stocks and 50% bonds. Rebalancing is crucial to the long-term health of a portfolio.
It can also be psychologically difficult, because it may involve saying good-bye to some top performers and potentially adding assets that may not appear all that stellar at the moment. Still, selling strength and buying weakness is an underlying principle of investing for many. Furthermore, if you have a taxable account, you might look for opportunities to “harvest” losses on the weakest of the weak to offset any gains you lock in.
New Year’s Investment Thesis
They call economics the “dismal” science for a reason. It’s generally thankless and hard to do. But guess what – you’re probably your own best economist. Take a look all around you and get a sense of what’s going on. Formulate your own point of view on the direction of interest rates, home sales or anything else that comes to mind.
Smart folks at the Federal Reserve and on Wall Street are watching folks like you, at the ground level – aka Main Street USA. Weigh this against other information you can find and you can sketch out an investment thesis for the next year or so. Then come back to this later, over and over, and see how your forecast is holding up.
Review Retirement Contributions
At this point, it’s probably too late to make a paycheck contribution to an employer 401(k) plan. Still, you have until April 15 to make an Individual Retirement Account contribution for this year. If you’re scrambling for another deduction or are behind on your retirement goal, maximizing your retirement contributions is an option.
Check with the IRS for information on contribution limits, and, if applicable, don’t forget your spouse’s IRA either.
Donate to Charity
Let’s face it, it can be an effective tax deduction. But let’s also remember that many people are struggling. The need for charity is endless and there are many qualified organizations that provide valuable assistance.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
TD Ameritrade does not provide tax advice. We suggest you consult with a qualified tax-planning professional with regard to your personal circumstances.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 TD Ameritrade.