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Money Talks | Is It Time To Rebalance?

Many aren't happy with their retirement accounts after a big downturn in 2022. So it's time to look to the future, but what should your strategy be?

TEMPLE, Texas — We have reached the New Year of 2023. 

The investment markets took a beating last year with the average portfolio losing anywhere between 10 and 30% depending on your risk tolerance.

Over the last 75 years, following a year that had 10% losses or more, the market was up 85 percent of the time. 

So, is it time to rebalance and look to the future for gains? 

You might choose to rebalance according to a set timeframe, like once a year at tax time or whenever your target asset allocation strays by a certain percentage, such as 5% or 10%. 

Warren buffet uses the 70/30 rule, meaning he keeps 70% of investment capital allocated to stocks and 30% to fixed-income securities, primarily bonds. 

Certified Financial Advisor Neil Vannoy told 6 News, "The mix of investments you hold is referred to as your "asset allocation." Younger investors tend to hold more in stocks for higher return potential, and older investors need more money in bonds for stability. 

The end of the year is a great time to check your investments and rebalance back to your target allocation, especially after a volatile year like the one we've had."

Even though, most of our accounts are down right now as they took a hit in 2022, many still paid dividends and capital gains and will become profitable when we are back in a bull market. 

Neil says, "We're all a year closer to our financial goals like college education expenses and retirement, so we should reevaluate our risk tolerance and adjust our asset allocations accordingly. Make sure you have enough in stocks for growth potential but not too much that you run the risk of losing sleep at night or suffering a market loss right before you need your money."

And remember, anytime we sell assets, whether taking profits or losses, we have a business partner, in “Uncle Sam, and the tax burden is always something to consider. 

Neil told 6 News, "Nobody likes losing money, but there is a silver lining to the investment losses cloud. If you have investments in a taxable account – meaning that they're outside of a tax-favored account like an IRA or 401(k) – you can sell these investments and write off the losses against investment gains. Just be sure not to buy a similar security within 31 days before or after you sell your losers or the IRS won't allow you to deduct the losses. This is known as the "wash sale" rule."

To wrap this up the S&P finished down 19.4 percent for 2022. That's a brutal number that lead to the evaporation of 6 point 8 trillion dollars. Let's hope for much better results in 2023.

Also on KCENTV.com 

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