Investing your money involves a lot of maintenance and constant tweaking. One of the best times to analyze your investment portfolio is towards the end of the year. If you are an active trader, there are different things you need to do to make sure you’re getting the most from your investments as opposed to if you are just an auto-pilot mutual fund type. Regardless of your involvement in investing, you should have a look over your assets and investment portfolio before you reach years end so you can make the necessary adjustments. That would mean getting on with these tasks right now!
Balance Your Investments: Of course your situation is probably different in November than it was in January. Maybe you have gotten a new job, maybe you have been laid off, maybe you have some big unexpected expenses pending, maybe you are having a child, maybe you’re moving in with an elderly parent and you’re quitting your job. Whatever the situation, there are changes which happen throughout the year. For this reason it’s important to look over your ‘money on paper’ (stocks, bonds, mutual funds, CD’s, savings, and other equities) and decide if this is still the right ‘balance’ for you. If you have $15,000 in the stock market and no money in savings but you plan on putting a spring addition to your garage, you’re going to have to pay for that somehow. The end of the year is a good time to survey your investment portfolio and balance your investment so they fit the anticipated year ahead.
Sell Losses for Tax Purposes: If you have experienced capital depreciation (sold stocks at a loss) you will be able to write off that loss on your income taxes, up to $3,000. If you lost more than $3,000 in any year, you can carry those losses forward for future years tax benefit. It’s important to be aware of your situation as it pertains to tax write downs.
Sell Gainers for Tax Purposes: If you have profited from certain investments, you may be able to sell these winners and realize tax benefits. If you are carrying forward losses from previous investments in a previous year, selling all or a portion of these gainers will allow you to reduce your tax burden on the sale and reinvest the proceeds.
Figuring your investment portfolio at the year’s end and how you can use your gains and losses to offset tax burdens is a tough call. If you are confused by the stipulations, consult a tax professional. However due to the proliferation of small time investors from the heady, hey-day 1980’s through the tech bubble of more recent times, the tax laws have been made much simpler as it pertains to investing. Many people have been losing in the stock market these last few years so if this is you, don’t be embarrassed. Just figure how the tax laws in this country can help to make you richer in the year to come.