2021 What A Year So Far

Wow… year-end 2021 is fast approaching. As if 2020 was the year we all wanted to turn the page… it is deja vu all over again in 2021. BUT a positive spin can still be put on year-to-date 2021, especially with respect to market returns.

It may be too early to say that stock market gains, to date, have been better than decent in 2021. From the US small-cap index up 12%, to large-cap S&P 500 up 22%, to Nasdaq up 19%, to the Dow Jones up 13%, these are all solid year-to-date returns.

Take the time before year-end to evaluate portfolio gains and asset allocation.

In fact, looking at the past three years’ gains in the same four areas index returns are +40%, +63%, +108% and +33%, respectively. Note there are volatility and risk reasons why a mix of these four areas makes sense for long-term portfolio preservation, growth and returns.

Returns such as these lead to several decisions and tasks as year-end fast approaches:

  • Please refer to Year-End Tax Planning Tips for a list of basic, pre-year-end tasks. Time runs out quickly.
  • Understand that death and taxes are two certain elements of life. Why is this relevant? Because with three to ten-year gains of the type described above, rebalancing (and paying the applicable taxes) becomes necessary.
  • What is rebalancing? Rebalancing is realizing gains (selling certain investments and paying applicable taxes) in the stock portion of a portfolio where the stock allocation has appreciated to an over-aggressive level. And then reallocating the proceeds to cash, bonds or another lower-risk asset class.
  • Note that taxes in certain IRA accounts are deferred until withdrawal of monies.
  • What is “over-aggressive”? Over-aggressive is a level of risk or allocation to stocks that causes an investor to lose sleep at night or could cause a level of losses that could wreak intermediate-to long-term damage to a portfolio or lifestyle. (Hint: please call me for a more customized answer.)

These decisions do not come easily and are not for the faint of heart! Decisions to sell, pay taxes or rebalance take evaluation and planning. Consider, though, there may not have been a time in the stock markets (except perhaps in certain sectors of dot.com tech in the 1990’s…and we all know how that ended) where portfolio gains have been this sustained and massive.

Take the time before year-end to evaluate portfolio gains and asset allocation.

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