March 9: End of the Year Maintenance for Your Stocks

by David Jenyns on March 9, 2007

As the end of each year winds down, there are five distinct procedures that you need to be sure to do in order to keep your stock portfolio current as well as to save you some money. This also helps to get your stock trading in check before the start of the new year. By providing a little maintenance to your stock portfolio, you can guarantee that your stock trading will be ready to go for the new year.

The following are five procedures in which you, the investor, need to be aware of before the end of the year in order to properly maintain your stock investments.

Tax Planning

In the United States, the Internal Revenue Service (IRS) allows you to offset any monetary gains with any monetary losses. For example, with your stock trading, this year you earned a total of $15,000 but you owe the IRS $5,875 in taxes. The IRS would take the $15,000 and subtract $5,875 from it and allow you to keep $9,125 of your stock earnings. Also to be considered, if you have sold some stocks during the year and you lost money on them, you may be able to claim them as a loss. If you are able to claim a loss, the IRS simply will not tax the amount that you lost. For example, you bought 100 stocks for $25 each, for a total of $2500, but you decided to sell all 100 of them. At that time, you only received $15 per stock, for a total of $1500. Therefore, the government would not tax the $1000 that you lost when you sold your stocks. Be sure to consult with a tax adviser because there are numerous tax breaks that you will receive just from investing in stocks.

Re-Balancing

Take the time to thoroughly review your stock portfolio with your broker so that any revisions that need to take place will get done. It is important to do this because you may have some stock that needs to be sold. For example, you purchased 100 shares of stock for $50 each, but your broker just got wind that if you don’t sell it before a certain date, then each share will drop in value to $25 per stock. If you and your broker did not take the time to discuss your portfolio, then you would obviously lose a significant amount of money due to not re-balancing your portfolio.

New Plan

It is quite possible that your portfolio is completely out-of-date after just one year of investing in the stock market. Any considerable change that has taken place in your personal life needs to be address, such as marriage, divorce, the birth of a baby, etc. because an event such as this could catastrophically change your investment portfolio dramatically. Once you have met with your broker at the start of a new year, it is imperative that you meet quarterly to discuss any changes that might have taken place in your life.

Something Totally New

Make a New Year’s resolution to learn a new, fundamental aspect about stock investments to apply to your current investment goals. This new aspect does not have to be complicated, but rather an investment fact that you can really “sink your teeth into” in order to benefit your investments. This is intended to raise your awareness even farther into investing as well as to challenge your comfort level of investing. Remember that knowledge is power, so the more you know about investing, the better your chances are of gaining a hefty return on your investment. This new found knowledge could plunge your financial situation into a whole new realm.

Make an Expanded Commitment

Now is the time to search out new markets that you would like to purchase stocks from. By reviewing your portfolio, you may find that certain stocks did not do as well as you had expected. If that is the case, expand your knowledge by researching new markets in which to invest. For example, you thought that the snack cake industry would explode, so you purchased a great number of stocks in Little Debbie. In examining your portfolio, you noticed that you only earned a 5% return, but you had estimated a 25% return on your investment. Now would be the time to research other avenues of interest in order to find a new industry in which to purchase stock from that you feel will prosper in the new year.

By following these five steps, you can rest assured that your investment portfolio will stay in wonderful shape for the coming year.

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