3 Ways to Prepare Your Portfolio By Year's End

It’s hard to believe that we’re almost at the end of 2013, right? At least, that’s what my inbox has been telling me. In the past few days I’ve been getting question after question about what we should be doing to prepare our portfolios for the end of this year and the beginning of the next one. Between year-end pension funding, tax concerns and the near-term strength in the small-cap arena, there’s a lot going on right now that we should factor in when managing our portfolios. To set the record straight, today I will answer three of the top questions I’ve been getting about what we need to do before the clock strikes midnight on January 1.

Since it’s almost the end of the year, I’m getting ready to sit down and get my finances in order. I was wondering if you had any tips for reviewing my portfolio or ideas on what I can do to make sure it is in a good place to start the New Year. Thanks!

You’re definitely on the right track in realizing portfolio maintenance is key to being a successful investor—whether you’re dealing with a few hundred dollars or a few million.

The first thing I would suggest to all investors is to make sure you get rid of any duds. If there are any positions that have consistently been performing poorly, then you probably don’t want to hold on to them. The point of investing is to make money, not lose it, so you should make sure as many of your holdings as possible are bringing in profits. I’d also suggest that you try my Portfolio Grader tool as well. You can enter in the stocks you already have to see if they’re really worth keeping. Remember, a D or F rated stock is an automatic sell in my book.

You should also decide what type of investments you are looking for. Are you more of a conservative or aggressive investor? Do you want to make investments for the long term, or build up profits in a shorter amount of time? These decisions will influence how you build and maintain your portfolio. Once you decide what type of investments you want to focus on, then you should balance your portfolio accordingly (i.e. include more conservative picks for a conservative portfolio or add in more aggressive picks for an aggressive one). I don’t suggest putting all your eggs in one basket, as they say. Make sure there’s some diversity to your holdings. Don’t only hold conservative picks or buy only technology stocks. The more well-rounded you are in terms of aggressiveness and in different sectors, the better chance you have in expanding your profits.

Lastly, don’t make reviewing your portfolio a once a year type of thing. It’s important to reassess your portfolio frequently enough that positions don’t become overweight or obsolete. This is your money, don’t let inattention allow it to dwindle away.

I have been offsetting my profits against my losing stocks that I bought earlier. I have a small income but a lot of tax deductions. I want to sell my winning stocks to generate an income to offset my tax deductions and show a low income. I would like to sell my winning stocks and then buy them back. I was wondering when the best time would be to do it this month?

That’s a nice problem to have. And my answer is that you should do what you need to do. If you want to have some gains to offset your loses this year, go ahead and realize those gains. Just realize that you need to wait 31 days before you can buy those stocks back. This is a very common thing to do at the end of the year—I actually do it with my managed portfolios.

How do you expect the market to perform in the New Year?

As far as 2014 is concerned, we’re going to see much of the same. We’re going to get year-end pension funding in the New Year. And I think that the market is pretty much going to meander higher through the end of April—we’ll probably have somewhat of a correction in mid-February at the end of earnings season. But the fact is that there’s nowhere to go. The market still yields more than the bank and the Fed still maintains its 0% interest rate policy, which allows corporations to borrow very cheaply on the bond market. And we’re starting to see good earnings, which was the missing ingredient in the stock market.

Now after April 15 I expect the market to get a little bumpier, simply because that’s when pension funding winds down. But this should be somewhat offset by good earnings. As a side note, at the end of nearly every quarterly earnings season there’s usually profit taking. There’s usually profit taking in mid-February for a few weeks, in mid-May for another few weeks, in August for several weeks and in November for maybe a week or so. But these pullbacks are usually short-lived and the excitement on Wall Street builds back up with the arrival of the next earnings announcement season.

When making stock market predictions, the longer ahead you look the fuzzier it gets. However from what I’m seeing , 2014 looks like it’s going to be another strong year.


Louis Navellier

Louis Navellier

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