In 2016, it is important to make sure that your finances are in order. The most crucial thing you can do is go to Horne and Slaton law firm and get financial planning advice from one of our experienced attorneys. Also check out this list, that can help you in your continued journey of financial success.
1. Don’t trade index funds. Not only do index funds tend to outperform actively managed funds, they are very tax-efficient because there’s very little trading of securities within funds. Yet selling an index fund eliminates these advantages, often resulting in a tax bill if sold at a gain. Not only is Clements right on this point, but studies indicate that the more we trade, the worse our results.
2. Don’t chase yield. Déjà vu all over again as high-yield bonds (aka junk bond funds) are down right now, and some have crashed. One such bond fund recently blocked investors from getting their money back. Bonds should be boring and act as your portfolio’s shock absorber.
3. Don’t overweight growth stocks. These are the high-flying, rapidly growing companies that are the darlings of Wall Street. Though over the past five years growth stocks have outperformed the rest of the stock market, research reveals that the slow-growing stocks (known as value stocks) have actually outperformed in the long run.
4. Don’t worry about estate taxes. We all want our heirs rather than the government to get our money. To counter that latter possibility, we might spend a lot to craft complex estate plans and buy expensive products to get money out of our estates. Clements notes that each of us will have a $5.45 million estate tax exemption in 2016 ($10.9 million for a married couple), and 99.8 percent of us are below this threshold.
As you make your resolution list this year, consider your financial health and these Do’s and Don’ts, as well as the many other critical suggestions in Jonathan Clements Money Guide 2016. I live and breathe financial planning, yet I always learn from Clements, and this book is no exception.
Financial health is important because it brings with it the freedom to pursue what you want in life. So here’s to a happy, healthy and wealthy 2016!
Allan Roth is a financial planner based in Colorado Springs, Colo. He writes a weekly online personal finance column for AARP.org.