Preparing Your Portfolio for the End of the Year

As the end of the year approaches, it’s time to consider your investment portfolio. Your portfolio can get a little stale over the course of the year, especially if you haven’t rebalanced it, or considered it in the context of the next stage of your financial plan. Plus, now is the time to consider the tax implications of your portfolio, and figure out whether or not your investments could help reduce your tax liability.


The time to prepare for tax season is now, before you get down to the wire and become frantic in your efforts. Take a look at where you are likely to fall in terms of tax liability. Then, look for ways that your investment portfolio can help.

Do you have some losers in your portfolio right now? The past couple of months have been brutal to a particular stock, or you might have some lackluster investments that just haven’t been performing for you. Your capital losses directly offset your capital gains, and you can use $3,000 of your losses to directly offset your income. (Your losses carry over to another year as well.)

Also, consider the gains situation before you sell at a profit. Remember that short-term capital gains are taxed at your marginal rate, while long-term capital gains can be taxed at a lower rate (depending on which bracket you fall in). If you want to sell for a profit, consider what you are selling, and make sure you understand the method for selling your holdings. Is it first in, first out? Or is it some sort of average holding time? If you need to, wait a little longer to avoid short-term capital gains tax rates.

If you have been thinking of boosting your retirement account, now is a great time. If you have a non-Roth, tax-advantaged retirement account (and you aren’t already maxed out on contributions), you can add to it and deduct the amount. So, you can beef up your portfolio and use your efforts to reduce your tax liability.


Take a look at your current portfolio. How does it fit into your plans? Is the asset allocation still what you need to reach your financial goals? You might be surprised to look at your portfolio and find that it is outdated. Carefully consider your financial plan, where you are at, and where you want to be. Is your current asset allocation keeping you on track? If not, it’s time to shift.

It’s also a good time to really consider the diversity in your portfolio. Look through your fund holdings for duplicates; as holdings are added and removed, it can change the makeup of a fund over time. Double check to make sure your investments are still doing what they should.

Consider Your Needs for Next Year

While you’re re-balancing, don’t forget to consider your needs for next year. Are you planning on having more kids? Is someone going to college? Are you getting close to retirement? These life milestones can impact what you need to do with your investment portfolio. Look ahead, and shift your assets to ensure that you’re where you need to be in the new year.

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