The best year-end moves an in­vestor can make in a bull mar­ket

The Denver Post - - BUSINESS - By Cy­bele Weisser

For most in­vestors, 2016 was a very good year.

And if you’re sit­ting on some fat gains in your port­fo­lio with the mar­ket marching through record af­ter record, you might be tempted to leave well enough alone.

“In a strong bull mar­ket, it’s easy to sit back and watch your bal­ance grow,” said Chris­tine Benz, di­rec­tor of per­sonal fi­nance at Morn­ingstar. “But this is ac­tu­ally a very op­por­tune time to look and think about mak­ing some changes.”

So be­fore you ring in the New Year, con­sider mak­ing the fol­low­ing moves.


Stocks went wild post-elec­tion, and bonds took a nose­dive. So chances are that your as­set al­lo­ca­tion, mean­ing the per­cent­age you keep in stocks vs. bonds, has gone way off course. For ex­am­ple, if your goal is to have a port­fo­lio with a 60-40 stock-bond mix, you might have a much higher per­cent­age in stocks now. Re­bal­anc­ing re­stores your orig­i­nal as­set al­lo­ca­tion.

“In most cases, a well-di­ver­si­fied port­fo­lio will have grounds for re­bal­anc­ing right now,” said Tim Mau­rer, di­rec­tor of per­sonal fi­nance for the in­de­pen­dent ad­viser group BAM Al­liance.


If your in­come is in the 15 per­cent tax bracket (in 2016, that’s up to $75,300 for a cou­ple) or be­low this year, per­haps be­cause of a job loss, or re­tire­ment, you can sell shares of ap­pre­ci­ated funds and pay no taxes on the gains. Most other in­vestors will pay a 15 per­cent rate on long-term cap­i­tal gains.

If you’ve lost money on any funds or ETFs, you can sell them and use the losses to off­set any taxes you may owe on investment gains. And you can write off up to $3,000 of losses per year against your in­come. Just heed the wash-sale rule, which says that you can’t buy the same or sim­i­lar se­cu­ri­ties within 30 days of the sale, or the IRS will dis­al­low the write-off.


De­cem­ber is the peak month for char­i­ta­ble do­na­tions. If you’re look­ing to make a gift, you also can get a tax break by mak­ing the do­na­tion in the form of shares of stocks or mu­tual funds. In gen­eral, you can claim the cur­rent mar­ket value of those shares, no mat­ter how much they’ve gained since you bought them, with­out pay­ing a cent in taxes.

This year, that tax-sav­ing move mer­its some ex­tra at­ten­tion. Pres­i­dent-elect Don­ald Trump has in­di­cated that he wants to cut tax rates es­pe­cially for higher earn­ers. That could po­ten­tially trim the value of fu­ture de­duc­tions. “You’ll get a big­ger bang for your buck while you’re pay­ing higher rates,” said Benz.


In 2016, you can con­trib­ute a max­i­mum of $18,000 to your 401(k) plan – plus an ex­tra $6,000 if you’re 50 or older.

Maxed out your 401(k) and still sit­ting on some ex­tra cash? Pad your re­tire­ment sav­ings fur­ther with a Roth or tra­di­tional IRA. For 2016, you can put in up to $5,500 ($6,500 if you’re 50 or older). You have un­til the April tax-fil­ing dead­line to make the con­tri­bu­tion.

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