With a month and a half left in 2023, it’s time to look at end-of-the-year strategies. Two of the key topics discussed during the Q4 Blooming Tree Wealth Management Virtual Lunch Webinar on 11/9 were fixed-income assets and tax harvesting.
Fixed Income
When interest rates stall near record highs, fixed income assets, like bonds that pay a fixed rate dividend, may be worth considering. Note that fixed income isn’t without risk and hasn’t been very attractive over the past couple of years, but that could change if CD rates are at their peak.
The Fed has been clear about its approach to interest rates, which leads us to believe they are done raising rates, or at the very least, are a small raise away from halting any rate hikes. At their current level, which is 5.4%, it’s hard to imagine the Fed feeling the need to raise rates above 5.6%. So whether we’re done with interest rate hikes or another one is around the corner, rates look to be at or near their high for the foreseeable future.
And if interest rates peak, keeping a portion of your portfolio in short-term cash is not an ideal strategy. However, adding a safe yet attractive fixed income asset may be more beneficial strategy than relying on a violently flat stock market for returns.
Tax Harvesting
Tax harvesting was mentioned during the webinar in response to a submitted question on what investors should do as we approach the end of the year. To sum up the strategy, tax harvesting is intentionally recording a loss in order to offset taxes from gains made in the same calendar year. If you have booked gains in 2023, contact your financial advisor before the end of the year to discuss your short-term strategy and to see if you would benefit from tax harvesting.
Read Ryan O’Connell’s post on the basics of tax harvesting here.
Additional Notes and Quotes
- “Volatility presents opportunities.”
- “If you don’t have a really good plan that allows you to tune out the noise around whatever the apocalypse du jour is at the time…you’ll have a very strong desire to get off the ride [at what could be the worst possible moment].”
- “I would rather be the owner of a great company than a loaner to a great company.”
The next Blooming Tree Wealth Management Virtual Lunch Webinar will be held in Q1 of 2024. All BTWM webinars are cost-free, open to all to attend, and include a Q&A session where all questions will be answered during the virtual call. Have a safe and healthy end to the year, and we look forward to guiding you towards a successful 2024.