A big stock reversal in 2023 could be enough to erase investors’ memories of last year’s rout, but now is the perfect time to clean up your portfolio and make sure it’s still on target. Indeed, the S&P 500 and Nasdaq Composite climbed to fresh 52-week highs on Tuesday, with a consumer price index report showing inflation continued to cool in May and investors hoping the Federal Reserve will keep interest rates on hold at its June meeting. .SPX .IXIC 1Y LINES The S&P 500 and Nasdaq Composite are poised for sharp gains in 2023, a marked turnaround from last year. The last thing investors probably want to do right now is prune their biggest winners and think deeply about their risk appetite — and that’s exactly what they should be doing. Jorrell Bland, Associate Wealth Advisor at Mitlin Financial, said: “For the families we serve, we do a mid-year review, and one of the main things we do is review their financial plans and their Goals.” “Look at your returns—where are you at the midpoint of the year?” he asked. “Hopefully we’ll end the year with double-digit returns, but the market is volatile.” 1. Rebalance your portfolio Tech’s dramatic rebound in 2023 could cause portfolios to tilt significantly toward the sector — and over-concentration could Can hurt in a downturn. That means it’s time to cut some outsized positions and make sure your asset allocation correctly reflects your goals. To that end, even Ritholtz Wealth Management CEO Josh Brown recently slashed his Nvidia stake by 25% as the semiconductor giant hits a $1 trillion valuation. Shares are up more than 170% in 2023. “It’s higher and I’m taking this opportunity to just take something away because man, it’s an eternity and I don’t want to sit here reversing and not doing anything,” he said on CNBC’s “Halftime Report” on May 30. said in. You can use the sale proceeds to snap up cheaper asset classes that you might be underweight in your portfolio, including dividend-paying stocks. “Dividend payers have underperformed the index this year,” said Tony Roth, chief investment officer at Wilmington Trust Investment Advisors. , companies with higher yields but not participating in the rally, and then adding more defensive positions to the portfolio. In fact, dividend-paying exchange-traded funds have been overshadowed by a surge in tech stocks that have pushed the index higher. Income investors’ darling JPMorgan Equity Premium Income ETF (JEPI) is largely flat this year, while Vanguard’s High Dividend Yield Index ETF (VYM) down more than 1% in 2023, excluding reinvested dividends. 2. Revisit your fixed income holdings Wilmington Trust’s Roth says he maintains “risky assets” citing the stickiness of inflation Instead, the firm is overweight in fixed income, particularly investment-grade munis for clients with taxable accounts. Ross likes the healthcare, hospital and education sectors, which he says are “we’re in the muni space.” Seen a lot of value”. On duration, a measure of a bond’s sensitivity to changes in interest rates, he said investors can buy these munis for three to five years. “We think we’ve seen most of the big changes in rates,” Ross added Dow. The appeal of municipal bonds is that income is not subject to federal tax, and if you live where the bond is issued, you avoid paying state income tax. Tax savings make them especially attractive to high-income investors. 3. Register cash with cash Another asset that demands your attention, especially in an age when investors can choose where to park those funds. “If it’s sitting in a checking account, the interest rate 0%, then the money is working for the bank, not you. A range of banks, including Goldman Sachs’ Marcus, Bread Financial and Synchrony, offer annual yields in excess of 4 percent on their online savings accounts. Some institutions offer at least 5 percent on 12-month CDs, including Bread Financial and Citizens Financial Group. Keep in mind that CDs come with a penalty if you “break” the instrument before the term ends. Short-term T-bills are also an attractive place to park some cash. Consider the three-month T-bill yields 5.2% , while one-year T-bills are yielding more than 5.1%. The money you need in the short term can be parked in Treasuries, but if you have a three- to four-year timeline, you can build a ladder of bonds to continue earning interest,” Pierce said , cash you don’t need for years can go straight back into your stock portfolio so you can stay ahead of inflation.” He added: “Make sure you have the right amount of cash and make sure you’re not sitting on a lot of cash that’s just sitting around doing nothing. -CNBC’s Michael Bloom contributed to this report.
Privacy Overview
This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.