5 Items to Help You Crush Your Mid-Year Investment Check-In

Busy adults love things that we can “set and forget.” Things like a meal cooked in a crockpot, a dishwasher scheduled to run once you’re asleep, an automatic tennis ball launcher for your pet, etc.

Unfortunately, for many, investing doesn’t feel like a “set and forget” task. There’s always the anxiety of watching markets ebb and flow, and trying to balance your financial goals with your own personal risk tolerance. Of course, there’s also the added stress of focusing on a long-term game plan and rebalancing in a non-reacitve way. For the average investor who also is balancing a career, family, friends, and hobbies – this is a tall order!

This is where teaming up with a financial advisor can come in handy. A financial advisor can be an asset by managing your investments for you. They keep a pulse on the ups and downs of the market while you get to spend time and energy doing what you love. At AVID, we take this one step further and have a unique approach to investment management that allows us to rebalance regularly, focus on the long-term goals of our clients, and skip the often-reactive (and often-ill-advised) “active” management tactics used by day traders.

But, even if you work with an advisor, you’re not totally off of the hook! Here are five things you should do this month for a mid-year investment check-in.

#1 - Review Your Long-Term Financial Goals

Investing is a long-term financial strategy, and one way you can work to reasses your portfolio regularly (while avoiding market “timing”) is to regularly evaluate your goals.

First, have you had any significant life changes occur?

Did you get married?
Did you have a child?
Have you switched employers?
Have you moved to a new location?

If significant changes have occurred in the last six months, some of your long-term goals may need to be adjusted. For example, let’s say that one of your long-term goals was saving up for a house renovation. If you moved to a new home, that goal has likely changed. Now is the time to re-frame your goals!

Remember, your financial goals should align with what matters most. If you value quality family time, you may greatly value saving for a family vacation. It’s okay to prioritize that!

Let your values lead the charge in determining what your financial goals are. And remember that it’s okay for them to change.

#2 - Check for Tax Loss Harvesting or Tax Gain Harvesting Opportunities

Investing comes with some potentially complicated tax implications. Let’s check to see if there are any opportunities for you to save on your tax bill.

Tax-loss harvesting is done by selling one investment at a loss to offset gains from the sales of other investments. After a well-performing investment is sold to generate a loss, you can buy into a similar (but not identical) investment. This offsets your costs while retaining a similar position in the now low-performing investment for potential future growth.

On the flip side, tax-gain harvesting is selling high-performing investments precisely to capture capital gains. This would be a strategy to use if your current capital gains tax rate is lower than you expect it to be in the future. This would allow you to sell your high-performing investment and pay the lower capital gains tax now rather than selling later and paying a higher capital gains tax.

Navigating these strategies can be complicated, so work with your financial advisor to determine if either will work for you.

#3 - Check for Roth Conversion Compatibility

You can use many different types of accounts to save for retirement. And you’re likely familiar with most of them. But have you ever heard of a Roth Conversion?

This is a strategy where an investor takes all or a portion of their traditional IRA (or 401k) balance and converts it to a Roth IRA.

Why would someone do this? Since the funds to be moved were contributed originally to a traditional IRA or 401k, they were made with pre-tax dollars. You'll have to pay income tax if you convert these funds via a Roth Conversion. But, once those taxes are paid, your money will grow in the Roth account tax-free, and you can make tax-free withdrawals during retirement.

This could be helpful if you anticipate being in a higher tax bracket during retirement. Moving the funds now can avoid a higher tax bill later on.

#4 - Re-enforce Your Commitment to the Buy and Hold Investment Strategy

We’ll let you in on a secret: timing the market doesn’t work. To do it successfully, you must buy at the lowest prices and sell at the highest. This is, of course, easier said than done.

If it sounds too good to be true, it probably is. Even the most committed investors can try to time the market, but it’s unreliable.

Market timing is the opposite of the buy-and-hold investment strategy, which means you focus on the short-term rather than the long. Inevitably the market will have ups and downs, and allowing emotions to drive your decision-making can hurt your financial growth. What goes down must come up!

By moving your investments around frequently, you risk not having your assets in the “right” places when the market moves in your favor. In addition, you’re potentially missing out on the benefit of compound interest.

#5 - Assess Your Portfolio’s Performance, and Your Own Risk Tolerance

An ideal investment portfolio falls within your risk comfort zone and is diverse. Diversification involves holding various investments and securities from different issuers and industries. The idea is that if one of your investments “fails,” you have others to help ensure your portfolio as a whole remains secure.

A mid-year check-in is an excellent time to see how your portfolio is performing. But remember not to make any rash decisions! Investing is a long-term strategy, so it will likely take time to see the results you’re looking for.

Now you’re ready for your mid-year investment check-in! If you’re ready to talk strategy or are just starting your financial planning journey, please contact us today.