Observations / december 2015

Don’t Forget About Year-End Investment Planning

By Frank Mokosak

As the year draws to a close, there might be a slew of tasks on your to-do list. One task to consider is reviewing your investments. If you take the time to get organized now, it may help you accomplish your long-term goals more efficiently. Some steps that might help.

Evaluate your investment portfolio

Review how your overall investment portfolio fared over the past year and determine whether adjustments are needed to keep it on track. Questions to consider:

Did your investments outperform, match, or underperform your expectations?
What caused your portfolio to perform the way it did? Was it due to one or multiple factors?
Were there any consistencies or anomalies you noticed compared to past performance?
Does money need to be redirected in order to pursue your short-term and long-term goals?
Is your portfolio adequately diversified, and does your existing asset allocation still make sense?

Aim for balance

Look at your current asset allocation among stocks, bonds, and cash alternatives. You might determine that one asset class has outperformed the others and now represents a larger proportion of your portfolio than desired. In this situation, you might want to rebalance.

Rebalancing typically involves buying and selling securities to restore your portfolio to your targeted asset allocation based on your risk tolerance, investment objectives, and time frame. For example, you might sell some securities in an overweighted asset class and use the proceeds to purchase assets in an underweighted asset class; of course, this could result in a tax liability.

If you own taxable investments that have lost money, consider selling shares of losing securities before the end of 2015 to recognize a tax loss on your tax return. Tax losses could be used to offset any tax gains. When attempting to realize a tax loss, remember the wash sale rule: when you sell a security at a loss and repurchase the same security within 30 days of the sale. When this happens, the loss is disallowed for tax purposes.

If you don’t want to sell any current investments but want to change your asset allocation over time, you might adjust future investment contributions so that more money is directed to the asset class you want to grow. Once your portfolio’s asset allocation reaches your desired balance, you can revert back to your previous strategy, if desired. Keep in mind that asset allocation and diversification do not guarantee a profit or protect against loss; they are methods used to help manage investment risk.

Set goals for the coming year

After a year-end investment review, you might resolve to increase contributions to an IRA, an employer-sponsored retirement plan, or a college fund next year. With a fresh perspective, you may be able to make better choices next year, which could potentially benefit your investment portfolio over the long term.

Frank Mokosak is a Certified Financial PlannerTM practitioner and Chartered Adviser in Philanthropy® with Mokosak Advisory Group, LLC, Urbandale. Contact Frank at (515) 223-5404 or frank@mokosakag.com. Registered Representative, Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Mokosak Advisory Group are not affiliated.