Amidst the hustle and bustle of the holiday season, many of us will forget that there are some important things to take care of before the end of the year when it comes to your investments.
Asset Allocation: Risk tolerance and the investment horizon can change quite a bit in one year. December is a great time to take a look at your portfolio and life situation to see if your target asset allocation needs to be updated. It is important to figure out a target asset allocation that you are comfortable with, and stick with it through thick and thin. Finding a good financial adviser will also be helpful.
Rebalance: The end of the year is a good time to look into your overall portfolio and rebalance it. This can save you time and money when investing during the following year.
Sell Off Bad Stock: Did you get yourself into “the next big stock” in 2013? Well, now is the time to sell that bad stock off, even if you have to take a bit of a hit. Better to do this now at the end of the year, than to lose more heading into the New Year.
Maximize Your Contributions: The end of the year is the best time to maximize your contributions. Whether it is into your 401(k), IRAs, or anything else, get as much into them as the law allows.
Required Minimum Distributions: US News says this one is only for people over age 70½. Don’t forget to take the required minimum distribution (RMD) from your IRA or 401(k) before the end of the year. The penalty for forgetting to take a RMD is quite expensive: a 50% tax on the amount not taken.
Now that you have those important things out of the way you can enjoy your holidays. Taking care of your financial situation will put you on the right track for the New Year.