What to Do About That Stock Market

The stock market has been on a roller coaster during 2007, causing many investors to reexamine their holdings. It may be time to sell (to take advantage of gains in certain companies) or to buy (if share prices in some companies seem poised for a rebound). Here are some questions to consider:

Have I picked my current stocks wisely? Look at the company’s position in its field and consider long-term potential. Remember, if you aren’t planning to sell the stock immediately, you haven’t necessarily “lost” any money when the value goes down.

What have market changes done to my investment mix? Perhaps it's time to reevaluate how much you have invested in stocks. Large gains in stocks and mutual funds may have thrown your portfolio out of balance. Retired investors might consider bonds, CDs, Treasuries and other investments less affected by Wall Street’s changes.

What is the “cost” of selling or buying right now? Taxes are an important consideration. If you sell at a gain, you’ll share your good fortune with the IRS. Losses are deductible only to the extent of capital gains plus $3,000 of other income. You can carry over any excess, but it may take years to deduct a large loss. If you sell shares at a loss and then purchase stock in the same company within 30 days, IRS rules will apply to defer the deduction. Consider brokers’ fees as well.

Am I willing to weather the storms of a fluctuating market? Determine the level of risk with which you are comfortable. Then review your portfolio exposure to see if you can safely ride out stock market upheavals with your current investments.

Do charitable gifts of appreciated securities make sense? Appreciated stocks held more than one year can be contributed at a double tax savings: You can deduct the current fair market value of your securities, not what you paid originally, and you won’t owe any tax on your long-term capital gains. Another option is to contribute stocks as a “life income gift” that provides you with a large deduction, lifetime income and capital gains tax savings.


<Back

Copyright © 2007 by R&R Newkirk. All rights reserved.

Print this page