6 Investment Moves to Make Now
2014 is well underway, but its never too late to follow through with financial resolutions. If you havent done it already, now might be a good time to consider conducting a personal financial check-up.Here are six things you might want to closer look at.
1. Rebalance your portfolio.
Let us assume that one year ago after analyzing your financial situation and setting aside an adequate amount of money for emergencies, vacations and short-term liquidity needs, you determined that approximately 65% of your remaining assets should be in the stock market with the balance in bonds.For illustration purposes, let us assume that your portfolio totaled $100,000.This would imply a $65,000 allocation to stocks and $35,000 to bonds as of the close of calendar year 2012.Due to the approximately thirty percent rise in stocks during 2013 as well as the two percent drop in bonds and assuming you kept pace with both averages, your portfolio would now total $118,800 and consist of $84,500 or 71% in the stock market and $34,300 or 29% in bonds.Assuming none of your objectives changed the prudent move would be to rebalance your portfolio back to the originally intended weighting of 65%/35%.This would be accomplished by shifting $7,280 from the stock portion of your portfolio into the fixed income portion.The net result would now be $77,220 or 65% of the $118,800 in the stock market and $41,580 or 35% of the $118,800 in the bond market.Sounds like selling high and buying low to us, not a bad idea.
2. Take advantage of your employer sponsored pension plan such as the 401(k), 403(b) or 457.
If its available and if you are not doing so already, begin to contribute to your employer sponsored pension plan at least up to a percentage that will maximize their matching contribution, if any.For individuals under the age of fifty the maximum amount that you can contribute is $17,500.However for those of us lucky enough to be over fifty, in addition to the $17,500, the Internal Revenue Service allows an additional $5,500 as a catch-up contribution.
3. Fund your IRA.
If you do not have an employer sponsored pension plan available where you work, maximize your Individual Retirement Account.For calendar year 2014 the Internal Revenue Service has determined that the maximum contribution for individuals under the age of fifty is $5,500 while those over fifty can contribute an additional $1,000.Furthermore, you have until the normal tax filing deadline of April 15thto fund your 2013 IRA.Pay yourself first.
4. Get religion.
No, not in the spiritual sense, we mean have faith in a well thought out and constructed investment plan.It is no wonder that the average investor severely underperforms the indices. They watch the market on a daily basis.They react to the devastating emotions of fear and greed and they listen to all of the talking heads.Turn off the television and radio, (except to listen to us every Sunday morning at 10 AM on Radio 810 WGY and 103.1 FM), and spend more time with your family or doing the things you love. When you spend less time tracking each and every movement of the market, youll be much less stressed out and more likely to get better returns on your investments.
5. Begin to get your tax information together.
What better way to begin to get an idea of what is coming in versus what is going out than assembling last years financial data.In addition to your tax information, get your checkbook out and review that.Assemble all of your credit card statements.Are you dining out too frequently?Are you hitting the ATM on a regular basis and spending money on items you could cook or brew at home?Watch the pennies and the dollars will take care of themselves.
6. Review all of your insurances.
Its the truck you dont see coming that hits you! Get your insurance policies out and make certain that you are protecting your most important assets.If youre in retirement, check out long-term care insurance or perhaps a trust or a program of gifting.If your future-earned income is your biggest asset, make certain that you have adequate life and disability income insurance.At Fagan Associates, we prefer term the majority of the time.Dont forget your home and business.An adverse liability judgment will dig you a hole you might never crawl out from.Make certain you are adequately covered.
THE BOTTOM LINE " During these cold winter months review your finances from top to bottom in an effort to construct a financial road map.You must first determine where you are to plan where you are going.If you dont you are leaving your financial future to chance.
Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call 518-279-1044.