With stock market gains in the 25 percent to 30 percent range in 2013, perhaps the most important thing investors can do is rebalance their portfolios, advisers say.
Since the bond market has been flat — with some bond funds showing a loss of 3 percent to 5 percent over the year — swap out those funds to offset gains in stocks, said Robert Pyle, wealth manager at Diversified Asset Management in Boulder. The wealth-management firm has more than $55 million in assets under management.
Most money managers will do the rebalancing work for you, based on guidelines you have set with them, said Todd Owen, regional investment manager for Wells Fargo’s Private Bank in Denver, the bank’s wealth management arm. Owen oversees offices in Boulder, Colorado Springs, Grand Junction and Denver, as well as in Montana and Wyoming. Wells Fargo Private Bank had $8.9 billion in assets under management in Boulder County in 2010.
Separately, make sure to re-establish relationships with your accountant and/or your attorney, Owen said. This year, especially, there are some investment-income tax law changes related to the Affordable Care Act, Owen said.
Some people in higher tax brackets (more than $200,000) will see new surtaxes on their investments — money Owen said will be used to help pay for the Affordable Care Act.
The Affordable Care Act, now commonly called “Obamacare,” was passed by Congress in 2010 and goes into effect in January, when every American must have health insurance or pay penalties on their tax returns.
For folks in lower tax brackets, don’t worry too much about the capital gains taxes you might have to pay on stocks, as they’re projected to continue to rise in value in 2014, Owen said. But if you want to make a smart tax move and help others, you can “gift” those appreciated securities to your favorite charities.
“We talk to clients and ask them what’s important to them,” Owen said. “All of this can be boiled down in a talk to your accountant to get ready for next year.”
The national firm Charles Schwab Corp., which has an office in Boulder, has a few more year-end tax-saving tips:
* Convert retirement accounts to Roth individual retirement accounts, which generally allow for tax-free savings and distributions.
* Explore the tax advantages of setting up a 529 account – a tax-free way to save money for a child’s education.
More generally, Wells Fargo’s investment “themes” nationally for the year match the Boulder Valley’s strengths, Owen said. Both the technology and energy innovation sectors are expected to be hot for investors in 2014, he said. Both are strong areas for the Boulder Valley economy.
Across the country, interest rates are expected to rise slightly to around 3.5 percent, Owen said, which could slow the rebounding real estate market. Interest rates currently are around 2.85 percent, he said.
Volcker rule approved
Finally, a quick thought about the Volcker rule, a key piece of legislation that bars bankers from trading for their own gain and limits them from having certain kinds of relationships with hedge funds or private-equity funds that engage in such trading.
After years of haggling, the rule was approved Dec. 13 by the five federal agencies that regulate financial matters in the United States: the Securities and Exchange Commission, Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Commodity Futures Trading Commission.
You may remember the financial crisis of late 2008, when a lack of such rules caused the former investment bank Lehman Brothers to go bankrupt, setting off a chain reaction that caused a national recession.
In the aftermath of that financial fiasco, lawmakers crafted the Dodd-Frank Act, a complete overhaul of the U.S. financial system, of which the Volcker rule is a key piece.
Volcker’s many naysayers have complained that the rule may stifle economic growth, or that it won’t be effective enough.
No matter how it plays out, the Volcker rule is sure to affect this country’s financial future. Already, most big banks have complied with various aspects of the rule, shutting down their proprietary trading desks and focusing on compliance manuals.
While the rule doesn’t formally go into effect until mid-2015, change is afoot.
Beth Potter can be reached at 303-630-1944 or firstname.lastname@example.org.