Wednesday, January 18, 2012, AM | 1 Comment
Most of us want or at least have the desire to invest. You could and should if 1) you are in strong financial health, 2) have very little or no debt at all, and 3) have cash on the sidelines. In the new year, there may be some very attractive investment opportunities that might fit your needs. You don’t have to be filthy rich to take advantage of these opportunities. But if you did take advantage, you might get closer to being filthy rich.
In a down economy, you don’t have to be very pessimistic. Optimists have seldom failed no matter what they have tried to do. They always take action after doing research to the best of their ability. This year may be a good time for investors to bargain hunt for stocks. Experts tell us the stock market is already priced for a recession, perhaps even a hard recession. Stock valuation will look compelling if the U.S. economy does not slip back into recession. Valuations are reasonable for many companies across different sectors. Large-cap companies seem to be the favorite among stock experts.
Investing in bonds is generally done for three reasons: To minimize the effect of rising inflation, diversifying portfolio, and seek to generate income. Investment gurus tell us high-yield bonds, which are currently yielding 8.5% on fears of recession, may offer good opportunities. Utility bonds seem to be in favor this year. These bonds may offer some stability in price and yield. Another type is commercial mortgage-backed securities which may be attractively priced today, with securities yielding 5%.
Capital loss against gain
You sell those securities which are not doing very well and are a drag in your portfolio to offset the capital gains in selling others. This is also called tax-loss harvesting. To keep your portfolio performing the best, a systematic tax-loss harvesting strategy requires very thorough investment tracking and detailed tax accounting.
As home prices in many parts of the U.S. have come down in value, now may be the time to purchase vacation home or income property if you have the money to invest in them. At the same time, interests rates still keep falling. In addition, owning a second property may include some or all of the below benefits:
- Certain tax-deductible operating expenses
- Mortgage interest (if owned as a vacation property)
- Rental income (if you are a landlord) that can help pay some or all of the mortgage
- Potential price appreciation over time
Annual portfolio review
An annual financial checkup serves multiple purposes. It allows you
- To evaluate and adjust your goals so they align with your financial strategies
- To take care of updating beneficiaries. It’s not complicated but can have serious consequences if they’re neglected.
- To consider the fees you are paying for products like annuities.
In a Nutshell
Talk to your financial adviser to be sure that your goals for the new year match up with your portfolio strategy. Make any adjustments as needed.