4 Things to Do to End Your Investing Year Right

Believe it not, this year will be over really quickly. When I worked in the brokerage industry this meant one thing…people waiting until the last minute to get their investing houses in check. The great thing is that you don’t have to wait around until December 31 to get started as I’m going to give you some tips about what you can do now to end your investing year right.

Rebalance Your Portfolio

Ok, so this is a no brainer. The crazy thing is that many just don’t do it and thus why it’s included here. It is very likely that your allocation has shifted some, so you want to rebalance it to get back in line with your investment plan. Speaking of investment plans, this is a perfect time to make sure it’s still in line with your overall goals.

If you have a 401(k) plan then many have a feature that allows them to simply automate the rebalancing for you. If not, it might require you to sell out of some holdings and put those funds into one of the other ones. Just make sure you’re aware of any early redemption fees and that you’re rebalancing in light of your entire portfolio.

Don’t Act Rashly

We have a tendency to act without thinking, especially when it comes to investing. While the year is coming to a close, you still have time to make the right decisions with your investing. You want to look at things like:

  • Avoiding the wash sale rule
  • Harvesting appropriate tax losses to offset any potential gains

It goes without saying, but you want to make sure you speak with a tax professional before making any tax-related decisions. You also want to make sure you’re keeping your long term view in mind and not simply selling out of a stock because it might have a loss.

Open an IRA

The one thing I likely saw more of anything in my brokerage past was investors waiting until December 31st to open an IRA and then get mad because it couldn’t get opened in time. Life is busy, I get it. However, you still have plenty of time to open an SEP or Education IRA if you do not currently have one.

The key to remember is that even though you open it this year, you still have until April 15th of next year to fund it. This feature helps you resist the urge to allow lack of funds currently to hold you back from saving for retirement. The closer you wait until the end of the year the longer it’s going to take your chosen brokerage to process it. The moral of the story – take action now and you won’t run into any risks of not being able to start putting away for retirement now.

Check Your Fees

Last but not least, analyze what kind of investment fees you’re paying. Believe it or not, there are plenty of investors who don’t and are thus losing money now and in the future. With that in mind, following are some of the fees you should take a look at:

  • Mutual fund expense fees – you should stay away from anything over 1%
  • Commissions
  • Account maintenance fees

There may be other fees out there, but these are the main culprits you want to take a serious look at. In nearly every circumstance, you’re going to be able to find lower cost alternatives. Not only will this allow more of your investing dollars to work for you now, but it will also help your long term growth potential as well.

Finally, since this article was written there have been a number of really interesting financial technology start ups. These generally leverage various forms of modern portfolio theory and advanced in trading transaction technology to offer low costs mutual funds. In fact, a lot of them will do all this rebalancing and fee minimization work for you. Some good ones to check out are Wealth Front, Personal Capital, Motif Investing and Betterment. Start there.

What are some of the things you do with your investing at the end of the year? When was the last time you took a look at your investment fees?

Photo courtesy of: Joe Lanman

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About John S

John Schmoll is the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. He's passionate about helping people learn from his mistakes so that they can enjoy the freedom that comes from living frugally.

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