Year End Investment Do’s and Dont’s

December 9, 2008

It’s been a tough year for investors. Many of us have seen our retirement accounts dwindle and we’re wondering when this market madness will end. The bad news is no one knows when it will get better, but the good news is that history suggests the market will eventually go back up. As we near the end of the crazy investing year, it’s a good time to re-evaluate where you have your money invested. Here are some Do’s and Dont’s if you’re investing for the long term.


Take out early distributions from your 401k and IRA. You’ll pay a 10% penalty and the IRS will take a percentage based on your income bracket.

Liquidate all of your taxable investments and stuff it under the mattress. You could think of this as a buying opportunity. You’re losing money on you’re existing investments, but you’re also buying stocks at a big discount. 


Re-balance your investments. During the year you might have made different money moves due to life circumstances, and now your investments are not following your personal investment goals. Or perhaps you’re had some real winners and some real losers that have skewed your diversification goals.  You may want to sell some of your winners, if you had any this year, and put that money into investments that are more reasonably priced.

Consider your time horizon and risk tolerance. Your time horizon is basically how long you have before you need to cash out or start drawing from your investments. Then, evaluate the level of risk you’re comfortable with taking in order to make a profit. Your risk perception may be a little bit different now than it was a year ago.

The combination of these two can help determine your mix of stocks, bonds, and cash investments. An aggressive investor with 30 years to invest may want to go with a higher percentage of stocks, and fewer bonds and cash. A more conservative investor with a shorter timeframe may want to go with fewer stocks, and a higher percentage of bonds and cash.

Re-evaluate your investments. Look at the winners and look at the losers. What have been their long term trends? What are their prospects for the future?  Don’t necessarily get rid of something just because it had one bad year, most every company has had a bad year.

If you have a financial planner or an advisor that you trust to offer advice on your investments, I would suggest setting up an appointment with them in the next month. Ask them to help you understand your current situation, your future goals, and how to attain those goals. One bad investing habit is to buy something and never think about it again. You shouldn’t micromanage your investments, but you also should not set just them and forget them. The end of the year is a good time to review your investment strategy.


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Erik Folgate is a husband and father living in Orlando who's been writing about money online for 6 years. Digging himself out of $20k of debt after college and his former experience in the insurance industry give him some useful insights into personal finance issues.

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2 Responses to Year End Investment Do’s and Dont’s

  • Joshua @ AccountableLiving

    This is also a good time to sell some of your investments, take the tax break on the “loss” or a lower realized gain, and then roll that into a Roth IRA.

  • Paulette @ Spend Tracker USA

    I would agree this is a buying opportunity – seize the day! Just work it into your monthly budget if possible. Also check to make sure ALL accounts are balanceable. 401k is the obvious one, but don’t forget about things like the 529 college savings plan. That account should also balance out (preferrably automatically) as the child nears college age, but not all accounts do that.