Happy New Year! Time to Check on Your Investment Strategy.

The beginning of the year is a wonderful time to get things headed in the right direction for the New Year.  So, as we enter 2015, it’s time to check up on your portfolio to see how you can optimize taxes, risk, and return.

  • Revisit your Allocation – This is the driving force behind how your investments perform over time.  Is it still appropriate?  Too risky?  Not risky enough?  Certainly no one, including us, knows where the stock and bond markets will go in the coming year, but we do know what type of risk allocations carry with them.  Spend some time thinking about the allocation with us in the context of your long-term plan.  The years dating back to 2009 have been great.  Maybe you can dial things down, sleep better at night, and still meet your long-term goals.
  • Taking Some Gains – We are now in a new tax year, and you may have positions you want to get out of over time, but the taxes are just too high.  Why sell now?  Two reasons:  1) You now give yourself 12 months to allow for the market to move down in which case you can harvest some losses and reduce your tax bill, and 2) It’s a new year and your income resets.  If gains were too high last year, you may have held off on making an investment move.  Now you can make this trade and have it considered 2015 income instead of recognizing the gain a few weeks sooner and watching it pile onto your 2014 tax return.
  • Think Roth Conversion – The earlier you do make these changes in the year, the more time you allow them to grow before needing to make a decision about whether this was a smart move or not.  If you convert in January, you give yourself almost 22 months to see the effect of the change given tax rules let you wait until October 15 of the following year to see if you want to “undo” any of this.  If you wait until late December, you’re down to only 10 months.  As the market generally goes up over time, the longer runway you give it, the better chance it has of performing well for you.
  • Do you have enough cash in the bank?  We always recommend you have some type of reserve in a bank account.  Did this get drawn down last year to the point where you should consider pulling some cash out of the portfolio? Or did too much accumulate so that you have idle cash, not needed in the short-term, earning nothing?  They say cash is king: the key is making sure it is ruling over the proper amount for you.

Rebalancing is often considered as a beginning of the year tactic.  We don’t think that this is the right move.  Don’t let the calendar dictate when rebalancing is done: the market doesn’t care what month it is.  Let the market dictate the timing of rebalancing.  That’s exactly what we do in our rebalancing process.  This may mean we rebalance your portfolio on a random day in May (as well as other random days), which benefits you long-term.  Rebalancing based on real-world price movements rather than the calendar can provide an extra boost to your portfolio over time.


Chad D. Carlson, CFP®, CFA is an Owner at BDF and serves as the Director of Research and a Wealth Manager.  Chad helps lead the Investment Committee in order to oversee investment policy as well as strategic and tactical decisions with regards to the firm’s entire client portfolio base.  He also works with individual clients to develop, implement, and monitor tailored financial solutions. Chad has frequently been quoted in publications such as The Wall Street Journal, Forbes, Investment News, Smart Money, ETF Perspectives, LA Times, and Dow Jones Newswires.  He also presents and writes on various investment topics as well as being a frequent conference participant to further enhance BDF’s investment research.