You know the scenario, it’s payday and before you know it bills are paid and you’ve already planned three dinners out with friends. Your budget is wiped out and you did not add to your savings. One of the best methods to ensure that you are hitting your savings goals is to pay yourself first.
Making trade and investment decisions based solely on big events is hardly ever an effective strategy. Having said that, there were obvious concerns about how this year’s election would affect markets and planning strategies. The best thing to do would have been to pick an allocation which you felt comfortable with and ride whatever wave came along with the election results. Some investors sat the sidelines, some bought what they thought might be winners in whatever their assumed outcome scenario was. All in all, what occurred is what I mentioned in our previous election commentary blog – the markets only care that there IS a President.
On the heels of the first Presidential debate of the 2020 Election, investors are increasingly turning their attention to the election and the impact that the result will have on the stock market. It is understood that elevated uncertainty usually affects markets in a negative way bringing lower stock prices. But as we have seen throughout our experiences with COVID this year; stocks move based on expectations of the future.
When you have a job change or are facing retirement there are a number of decisions that need to be made. One of the more significant ones is what to do with your 401(k). The choice may seem straight-forward but it is anything but. When making this decision it is critical to weigh in all the factors to your decision.
Many believe that their money is locked in when you are a participant in a 401(k) or profit sharing plan through an employer where you are a participating and current employee. However, certain qualifying events allow employees to access their vested balance to either withdraw and/or roll over money from those accounts and still continue to contribute.
Market moves can be choppy at times and downright terrifying. This is one reason many would-be investors never take the leap into investing their savings. We know that in order to make your dollars last, we must take on some risk in order to grow them. Then our rational minds try to determine that perfect moment to begin, which in itself is an impossible task - as we all know that trying to time the market is a fool’s errand. You can avoid the stress of getting together a lump-sum to invest and make saving possible without having to overthink it by utilizing the principle of dollar-cost averaging.
The period between Thanksgiving and the end-of-year holiday season would seem like a sleepy time for financial planners, but in fact it is anything but. You might be surprised at how much activity takes place on behalf of you and your investments in the final month of the year.
For instance? Even though this has been a good year in the markets, not all investments will have gained value. This is the last opportunity to harvest any losses we find in taxable accounts, by selling investments that have gone down and “booking” the loss. Then we can look for investments that have gained value, sell some of those to offset the losses, and thereby save capital gains taxes in the future. Up to $3,000 of ordinary income can be offset by investment losses as well.
This is also the time of year when mutual fund companies post, in advance, the amount of ordinary income and capital gain distributions they will make to their shareholders. Since the value of the shares drops by the amount that is distributed, this would seem like a non-event performance-wise. But in fact some mutual funds are poised to make 20% or even 30% distributions, and this cash is immediately taxable, unlike gains in the share values, which are only realized when you decide to sell. By selling funds before the distributions, and buying them back later, we can reduce your tax bill this year.
Are you retiring or changing jobs and have a rollover? Getting a bonus or expecting a large tax-refund. Let’s invest it!
What is your Risk Tolerance? Identifying and analyzing your preferred level of potential loss is essential in Financial Planning. Once you have saved toward any given goal, the idea is to leverage it so that you can gain more. Risk Management involves the trade off – how much you are willing to risk on the downside to potential gain on the upside.
The Federal Reserve has once again raised interest rates by 25 basis points, but is still maintaining their placid stance toward economic policy. This allowed equities last week to end a tumultuous week with a slight uptick. The expectation is that the Fed is going to continue to raise rates very slowly.
