While it is impossible to know now just what many of these changes might be, and how they may affect you, staying informed and following a sound financial plan will be as important as ever. Shifts in legislative and monetary policy have implications not only for investing but in all areas of your financial picture. To stay abreast of tax law proposals, and what they might mean for you, see In Your Interest: The Tax Change Agenda.
To help prepare you for both the opportunities and risks we see ahead, we have identified a number of strategies and ideas to help address the potential impact that changes in Washington and around the globe may have on personal balance sheets. They range from investing and borrowing techniques, to guidance on charitable giving, and ways to protect against cybercrime.
Set Expectations Around Market Volatility
Volatility is a normal part of investing, and every year presents opportunities and challenges. Even in years when equities experience stretches of weakness, the market usually recovers. In fact, stocks have delivered positive returns in roughly 80% of the years since 1980.
Evaluate Cash Balances Against Your Goals
You may want to evaluate your cash-flow needs for year-end as well as for 2017. As with any other asset, you need to allocate your cash in ways consistent with short-term liquidity needs, investment goals and risk appetite. Then you can consider allocating funds in appropriate short and intermediate vehicles to ensure your cash is working for you until you need it. You may also want to consider having a line of credit in place to have access to liquidity.
Review Your Bond Investments
Interest rates appear headed for moderate moves higher should the U.S. economy continue to recover in 2017. Besides affecting the cost of borrowing, even small changes in rates can make big differences in the performance of investment portfolios. Consider a careful evaluation of your fixed income holdings.
Empower Your Charitable Giving
A donor-advised fund (DAF) is a charitable giving vehicle that is easily established so you can enjoy a potential tax deduction while having time to thoughtfully select charitable organizations. You also have the additional benefit of having your donated assets invested to grow free of federal and state taxes.
Increase Exposure to U.S. Stocks
Stronger earnings and the potential for pro-growth policies could boost U.S equities this year. Optimize positions today and be prepared to add to them during pullbacks, which may not last long.
Review Real Estate Holdings
The way you hold real estate affects your privacy, your tax position and your estate. Whether you’re buying a residence, vacation home or investment property, the structure of the purchase is as meaningful as the home’s location.
Consider How Borrowing Might Boost Tax Efficiency
Employ smart borrowing strategies such as using credit to buy taxable investments. The interest on a mortgage or home equity line of credit may be deductible against taxable investment income.
Avoid Becoming a Cybercrime Victim
We are doing more than ever to protect our clients, but vigilance is our shared responsibility. We’ve created a series of short films to help you understand the threat and steps you can take now to help keep you from becoming a victim of cybercrime.
To learn more about these and other planning strategies, we invite you to contact us and a J.P. Morgan representative will be in touch with you.
1. Past performance is never a guarantee of future results.