Another Bloomberg

Jalene Hahn |

Tis the season when people’s thoughts turn to evaluating how the year went and what they might want to do differently during the next. With that in mind, I’d like to turn to Michael Bloomberg’s slightly less well known daughter, Georgina, to provide a quotation for my year-end note to clients and friends: I don't believe in New Year's resolutions. I think if you want to change something, change it today and don't wait until the New Year.

Although a lot of people expressed concern about what a Donald Trump presidency might mean for the economy, this has been a banner year for investors. Headlines notwithstanding, it is our belief that stock prices tend to follow corporate earnings. As long as the economy continues its gentle and long-lived expansion, it seems likely that profits will continue to rise. That suggests that remaining invested is the proper approach. So who is the loser in this situation? It’s the timid investor who sold during the 2007/08 correction and has yet to return to the market. Historically, those people will wait too long to make their way back, only to be disappointed once again. I’m not positive this is the ideal time to get back into the market but I do think it’s a good time to discuss the concept with your advisor.

Investors whose accounts have done well will probably want to consider rebalancing their portfolios as year-end approaches. Generally, we think that a specific mix of stocks (of various types) and bonds (of various qualities and maturities) ought to remain fairly constant. After a very positive year, the asset mix should be reviewed for continued suitability, then adjustments made to bring the balance back to the target allocation. Of course, this is likely to be easier in a retirement account since taking gains will not be a taxable event.

Even the most successful of investors have probably chosen some stocks which haven’t done so well. We think it’s also a good time to look at your after-tax portfolio and consider pruning those weaker positions, allowing losses to offset other income. If you believe the stock still represents a reasonable value, you can wait 30 days before buying it back (to avoid ‘wash sale’ rules) or buy a similar stock as you sell.

Tax laws are in limbo once again. That, combined with the wonderful market returns we’ve enjoyed over the past year, makes some year-end gifting strategies worth considering. With many current deductions up for grabs in 2018, it may make sense to try to utilize them this year, even if it involves prepaying a gift that you are planning to give next year. It’s gotten quite easy to make a gift of appreciated securities to an organization – almost all of them have brokerage accounts these days. And I’m pretty confident the organization you have in mind will be able to keep track of an early payment of next year’s gift.

Along the same line, if you’re over 70½, you’re obligated to take required minimum distributions from your IRA accounts. Current rules allow you to make a gift directly to one or more charities with a cap of $100,000 yearly. While not deductible (as a gift from a brokerage account would be) neither is the distribution taxable income to you. The net result is positive if you don’t actually need the RMD income to live on.

Beyond specific investment-related strategies, it’s not unusual for us to meet a new client who has multiple brokerage accounts in various stages of activity. Perhaps they’re hold-overs from a previous job or an account opened with a friend just starting in the business. Our policy is to encourage people to simplify their accounts as much as the law allows. Reducing the number of statements arriving in the mail- or in-box allows for more time spent on pleasurable activities.

While you’re in the simplifying frame of mind, it is also a good time to consider why you’re hanging onto all those things you’re keeping in boxes in the basement, garage or – worse yet – a storage unit. One of the bits of advice we repeatedly offer clients is ‘You’ll never be younger or healthier than you are today’. Those of us who are nearing or in retirement are likely to face downsizing at some point in the future or worse, encounter a physical or mental limitation that forces the transfer of that process to someone else. Virtually all middle-class Americans have more than they need. Please consider simplifying your life by letting some of those things go, even if your children aren’t especially interested in them.

Let me close with a story shared by our friend Carl Richards in the New York Times. Reem Kassis had a dream about publishing a cookbook but she had no background as a writer and no contacts in the publishing industry, not even an agent. Yet, by taking one small step at a time, she was able to publish The Palestinian Table with (so far) 10 Five Star reviews at Amazon. Had she waited for a new year to take each of her steps, she’d still be taking them.

Smalls steps or large, Jalene, Peggy & I wish you a productive – and enjoyable – holiday season.