Three Smart Year-End Moves

As one year turns into another, I always give my finances a check-up. Here are three moves that I recommend you make at least once a year.

1. Name or review your beneficiaries

Our circumstances change as the years go by. People marry and divorce. Children grow up. There are numerous horror stories out there about a spouse losing an inheritance to an ex-spouse because beneficiaries were not updated. At least once a year you should take a look at your holdings and ensure your money will go to the people who deserve it.

If you haven’t named beneficiaries, you should do that right away. If something happens to you, you won’t want to increase the difficulty for your heirs by setting up a fight for what you built. Get the money into the hands of those you want to have it.

2. Review your investments to ensure they still fit your objectives

Spend a little time thinking about what you want to accomplish financially in the upcoming year. Perhaps you are saving money for a goal, or perhaps you are transitioning from one phase to another.

This becomes important as you get older. The aggressive investments of your 20s aren’t necessarily the same investments you want to have in your portfolio in your 60s. The growth potential of those aggressive investments is nice, but a down market can wipe out years of gains. As I told a friend recently, “The upside potential doesn’t matter if you can’t afford the downside risk.”

If you find that you need to de-risk your portfolio, shift some of those aggressive holdings into more stable stocks or bonds. Alternatively, if you are in your 50s and completely in bonds, add a few stocks to your portfolio to benefit from growth potential. You may be risk averse, but a portfolio that is too heavy in bonds risks losing purchasing power to inflation.

3. Harvest your losses

At the end of the year, we all have winners and losers. Most of the time I hate to sell a loser, but at the end of the year I make an exception. Selling losers can help offset the gains in your winners, limiting your tax liability.

But what if you don’t really want to sell a particular loser? One option is to sell the loser and shift the money into a company in the same sector. That way, you keep the same exposure. When the sector rallies, you’ll still benefit from that rally.

I recently did this with EOG Resources (NYSE: EOG). This is an oil company that performed well for years, but it was hard-hit with this year’s pandemic sell-off. I was facing a large loss on paper, but I have large gains elsewhere in my portfolio. Consequently, I sold EOG to capture the loss, and immediately rolled that money over into ConocoPhillips (NYSE: COP).

Both EOG and COP have rallied since then as the energy sector bounced up, but I now have a loss that I can use to offset those other gains. Meanwhile, I will hang onto ConocoPhillips and next year it may be one of those gains I need to offset.

Editor’s Note: Our colleague Robert Rapier just explained three shrewd investment moves to make now. As the year winds to a close, do you seek growth opportunities for 2021? Turn to commodities, especially copper.

A major beneficiary of robust global growth next year should be commodities, especially copper. The versatile properties of the “red metal” make it ubiquitous in manufacturing processes and finished products.

The modern industrial world can’t function without copper, but supply of the metal has fallen due to production cutbacks. The combination of growing demand and insufficient supply is likely to push copper prices through the roof.

The prices of copper and other vital commodities are staging a remarkable rally that should continue into 2021, as economic recovery and construction projects fuel the need for raw materials. Prices for copper already have risen to their highest level in almost eight years.

Our investment team has found a small, under-the-radar copper play that’s poised to generate outsized gains. Learn more by clicking here.