It’s October, just a few months from the end of the year and typically not a bad time to think about reviewing your portfolio.
The Dow Jones is near a record all time high,so you probably have a lot of winners in the old portfolio!
“Winning” as Charlie Sheehan would say.
Sell those losers!
Maybe you bought that hot new ETF ( exchange traded fund) the invests in Pet Rocks based on a tip from your dog walker. If so, you might have a few stinkers in your portfolio.
The idea is to consider selling losses (securities that are trading for less than you paid for them) before the calendar year end, and use those losses to offset any capital gains from winning investments you had.
If you don’t have gains to offset, you are allowed a deduction of $3,000 annually in losses against your regular income.
So a take a look at your winners (in your non-retirement accounts) to determine your capital gains on positions your have already sold or possibly mutual fund distributions.
Short Term vs. Long Term
Are the gains short term ( held less than a year) or long term ( held longer than a year)?
Yes, size matters.
So look for Losers and investments that are expected to do poorly in the future, or one that can be easily replaced by other investments that fill a similar role in your portfolio. ( Be aware of the Wash Sale rule)
So short term losses are matched agains short term gains AND long term losses are matched against long term gains firstly. If you have losses of one type ( short term, for example) that exceed the same type of gain, you can apply the excess to the other type.
Another benefit of this review, is your portfolio may no longer match you risk tolerance and needs to be brought back into your comfort zone. The market has been on a tear since “he who will not be named” took office. Possibly one or more areas of your portfolio have swelled to a larger percentage than expected.
So grab a beer (and chips), flip open the laptop and spend a little time on the portfolio!!