WiserAdvisor – Blog

Main Menu

  • Main
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Investment Management
  • More
    • Personal Finance
    • Estate Planning
logo
I Want to Take Charge.
HELP ME FIND AND COMPARE TOP VETTED FINANCIAL ADVISORS IN MY AREA.

FINRA/SEC Registered Advisors

  Your Information is Safe and Secure

WiserAdvisor – Blog

  • Main
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Investment Management
  • More
    • Personal Finance
    • Estate Planning
Investment Management
Home›Investment Management›How to Improve Your Investment Portfolio

How to Improve Your Investment Portfolio

By WiserAdvisor Insights
January 4, 2021
6843
0
Investment

2020 has been a turbulent year. The coronavirus pandemic has caused both a health and an economic crisis across the world, including the U.S. The economic impact of the novel coronavirus is unprecedented in its scale and the entire financial world is recovering from the shock. Many stocks have plummeted in value, investment portfolios have lost money, millions have lost their jobs, and people have consumed more of their retirement savings than expected. However, with the news of the vaccine hitting the markets, there is a strong hope for an economic recovery.

To improve your investment portfolio performance in 2021, here are some effective measures below:

Re-evaluate your portfolio

2020 has been a volatile year, especially for market investors. In many cases, it was found that investment portfolios comprised of stock holdings higher than the risk appetite of the investor may have lost a lot in their portfolio values. However, to overcome these losses and ensure your portfolio performs well in 2021, you should consider rebalancing your portfolio. The first step is to know how much money is invested in your taxable and non-taxable accounts, including the retirement savings plans. In case you are married, add the balances of your spouse’s accounts too and assess how much of your holdings are distributed in stocks, bonds, cash, and other market For target-date funds or mutual funds, get into the details of their division across these specific market securities. Once you know the exact allocation, determine the percentage of each – stock, bonds, and cash – across your portfolio. Next, evaluate if your holding in these categories matches your risk profile and life stage. For example, if you hold 70% in shares, while your risk appetite is only for 50%, it is time to adjust your portfolio accordingly by selling your best-performing stocks and redirecting the money into bonds and cash.

Improve your yield

Gaining yield on your investment can be quite a challenge for 2021. According to the Federal Reserve, short-term interest rates are set at zero until 2023. On the other hand, long-term interest rates have shown no signs of improvement and coupled with inflation, your portfolios may be losing value. However, it is important to make the right choices to find a balance between yield and risk in 2021. You can choose corporate bonds that offer nothing less than a 1.78% yield and have a credit rating of at least double-B. You can also consider investing in ETFs (Exchange Traded Funds) that have a secure rating, and some government mortgage bonds that help balance volatility and offer a considerable yield. That said, if you hold money in taxable accounts, consider investing in municipal bonds that generate interest income, which is free from federal taxes. In some cases, the interest earnings from municipal bonds are also exempt from state and local taxes.

Opt for new-edge companies

2021 is going to be the year of discovery. From the growing digitization and the advancement across industries, it is time to focus your portfolio to include a few new-age stocks. These companies have the potential to provide higher returns in the coming years. Hence, investing some funds into these companies that reportedly (from trusted sources) have high return potential can be good for your portfolio. According to reports, genome sequencing, robotics, artificial intelligence, energy storage, and block-chain technology are some of the high-rewarding industries of the future.

Minimize investment taxes

2020 has drained investment portfolios of millions of funds, owing to the coronavirus pandemic. If you sold some of your high-performing assets from the taxable accounts in the past year to bridge the income gap, you are liable to pay taxes to the IRS (Internal Revenue Services). For investments held for less than a year, the IRS will levy ordinary income tax rates between 10% and 37%. For those investments held for more than a year, the IRS will charge a long-term capital gain tax rate between 0% and 23.8%. However, to minimize your tax bill for 2021 you can opt for methods like tax-loss harvesting. As per this method, you can sell underperforming securities at a loss to offset your capital gains and to reduce your But you must check the terms and conditions of tax-loss harvesting to ensure you work this technique to your advantage. Also, you should be more careful if you are retired because your capital gains can increase taxes on your Social Security benefits.

Maximize retirement savings plans

If you happened to hoard a lot of cash for emergencies in 2020, you might want to put that into use in 2021. As per reports, even though the COVID-19 pandemic caused a financial slump, people still had a lot of cash reserves for emergencies. It is wise to invest any excess cash reserves into appropriate retirement savings plans before the end of 2020. For 2020, the contribution limits for retirement plans like 401(k), 403(b), etc., have been set at $19,500 by the IRS. However, if you are 50 or above, you can contribute an additional $6,500 in catch up-contributions in 2020. These limits are expected to remain the same for 2021 as well. You can direct excess cash into your employer-sponsored plan as you should try to increase the percentage of contributions in the coming year until you meet the upper limit. Further, in case you get a year-end bonus or any stimulus for 2020, consider contributing it to your retirement plan. Alternatively, if you do not have an employer-sponsored plan like a 401(k) in place, you can invest money in an IRA (Individual Retirement Account). For 2020, you can contribute $6,000 in an IRA and $7,000 if you are 50 years or older. You can invest in an IRA until April 15, 2021, however, the sooner you invest the better.

Do not forget the RMDs

RMDs (Required Minimum Distributions) are mandatory withdrawals that you must take from your retirement savings accounts once you are 72. RMD rules apply to all retirement savings accounts, including IRAs, 401(k), Rollover IRAs, and others. Even though the CARES Act 2020 allows retirees to skip their RMDs (Required Minimum Distributions) for this year, you must not forget them in 2021. Missing your RMDs, or not taking your RMDs in full or even within the stipulated timeline (31 December of each year after you turn 72), will attract a hefty penalty from the IRS. The penalty can be up to 50% of the amount not withdrawn from the retirement savings account. Tax penalties can cause a dent in your savings.

To sum it up

After a tumultuous 2020, there is high hope that 2021 will bring optimum rewards for investors. To make sure you are prepared to fully tap opportunities and improve the overall performance of your investment portfolio in the new year, you can consult a professional financial advisor.

Tags#retirement savingInvestmentMunicipal BondsPortfolio ManagementStock
Previous Article

6 Reasons Why Frugality Is the Key ...

Next Article

7 Things to Remember About Index-Oriented Investing

0
Shares
  • 0
  • +
  • 0
  • 0
  • 0
  • 0
WA-icon

WiserAdvisor Insights

A team of dedicated writers, editors and finance specialists sharing their insights, expertise and industry knowledge to help individuals live their best financial life and reach their personal financial goals. We believe that there is no place for fear in anyone's financial future and that each individual should have easy access to credible financial advice.

Related articles More from author

  • Investment-Industry-Conflicts
    Financial Planning

    Potential Conflicts Within the Investment Industry

    December 24, 2019
    By WiserAdvisor Insights
  • Economic-Bubble
    Uncategorized

    Economic Bubbles: Everything you should know about them

    October 6, 2019
    By WiserAdvisor Insights
  • 6 things you must remember about dedicated portfolios
    Financial Planning

    6 Things You Must Remember About Dedicated Portfolios

    August 20, 2020
    By WiserAdvisor Insights
  • Short term Goals
    Financial Planning

    How to craft the perfect financial plan for short, medium and long term goals

    August 2, 2019
    By WiserAdvisor Insights
  • Do's & don't Financial planning
    Financial Planning

    The Dos and Don’ts of Financial Planning

    August 28, 2019
    By WiserAdvisor Insights
  • Ways to Circumvent Short-Termism
    Financial Planning

    Ways to Circumvent Short-Termism

    June 5, 2020
    By WiserAdvisor Insights

You might be interested

  • Financial Advisor
    Financial Advisor Guide

    The Importance of Sharing Your Complete Financial Information With Your Financial Advisor

  • Know-Your-Financial-plan
    Financial Planning

    The Importance of Knowing Your Financial ‘Why’

  • Financial Portfolio Adjustment Amid Coronavirus Pandemic
    Financial Planning

    Financial Portfolio Adjustment Amid Coronavirus Pandemic

Don't miss out! Get our Helpful Financial Tips Newsletter

  • Popular Posts

  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • Financial-Professional

    How to prepare for a meeting with your Financial Advisor

    By WiserAdvisor Insights
    July 8, 2019
  • retirement-accounts

    Choosing the Best Retirement Accounts

    By WiserAdvisor Insights
    July 8, 2019
  • Retirement-Planning

    Retirement Planning checklist

    By WiserAdvisor Insights
    July 8, 2019
  • Why investing for goals is the right way of investing

    Why Investing for goals is the right way of Investing?

    By WiserAdvisor Insights
    July 16, 2019
  • Portfolio diversification

    5 Dangers of Over-Diversifying your Portfolio

    By WiserAdvisor Insights
    July 26, 2019
  • Financial Planning for couple

    The Complete Guide on Financial Planning for Couples

    By WiserAdvisor Insights
    August 1, 2019
  • Roth-IRA

    Can You Open a Roth IRA After You Turn 60?

    By Jonathan Dash
    December 19, 2021

Categories

  • Business Finance (2)
  • Education Planning (29)
  • Estate Planning (22)
  • Financial Advisor (1)
  • Financial Advisor Guide (32)
  • Financial Planning (123)
  • Investment Management (69)
  • Personal Finance (12)
  • Portfolio Management (1)
  • Retirement (21)
  • Retirement Healthcare (1)
  • Retirement Planning (79)
  • Retirement Plans (1)
  • Uncategorized (2)

The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.

WiserAdvisor is America’s oldest and largest independent network of screened financial advisors. We make it easy and convenient for consumers to find and connect with advisors in their area. We have successfully helped over 100,000+ individuals find their best financial advisor since 1998 with no match fees, no commitments, no obligation, and complete confidentiality. WiserAdvisor has been featured in The Washington Post, The Washington Journal, ABC, CBS, Yahoo and has been seen in numerous other leading financial news and information websites.

Follow Us

  • Recent

  • Popular

  • Estate Planning Strategies For High-Net-Worth Individuals

    Estate Planning Strategies For High-Net-Worth Individuals

    By WiserAdvisor Insights
    June 6, 2023
  • What are the Different Types of Financial Advisors?

    What are the Different Types of Financial Advisors?

    By WiserAdvisor Insights
    June 2, 2023
  • SIMPLE IRA vs 401(k) Plan

    The Pros And Cons Of A SIMPLE IRA Versus A 401(k) Plan

    By WiserAdvisor Insights
    May 31, 2023
  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • Financial-Professional

    How to prepare for a meeting with your Financial Advisor

    By WiserAdvisor Insights
    July 8, 2019
  • retirement-accounts

    Choosing the Best Retirement Accounts

    By WiserAdvisor Insights
    July 8, 2019

Contact Us

Corporate Headquarters

12150 Monument Drive, Suite 700
Fairfax, VA, 22033

Business Hours

8:30 AM – 5:00 PM EST (Monday – Friday)

Email Address

wa.assistance@wiseradvisor.com

Phone Number

(703) 651-2060

Fax Number

(703) 259-4487

  • Privacy Policy
  • Terms & Conditions
© Copyright 2023 WiserAdvisor.com. All Rights Reserved.
Go to mobile version