Investment Advice For People Over 40

Mark Rosenberg

July 24, 2016

1. The appropriate asset allocation for you at age 40. How you divide your portfolio among stocks, bonds, and cash investments can have a big impact on your returns—and the asset allocation percentages you chose years ago may no longer be right for you as your investment time frame shortens or your financial goals change. Your financial advisor can help you determine an appropriate asset allocation for this stage in your life, as well as adjust your portfolio if necessary.

2. The importance of diversification. If you put all of your eggs in one basket and the basket falls, you may be left with little or nothing. The same holds true for investing. For example, rather than investing in just a few hot stocks, it is generally a better idea to invest in a variety of companies, sectors, market capitalizations, and geographies so that the effect of a downturn in one company, industry, market cap, or region has less of an impact on your overall portfolio.
It is important to remember that although diversification and asset allocation can help cushion losses, they do not ensure a profit or guarantee against loss in declining markets.

3. How to qualify for a lower tax rate on your investment gains. When you sell an investment in a taxable account for more than you paid for it, your gain (profit) is taxable. You can slash the tax rate you pay on it by holding the investment for longer than one year before selling it.

And if you hold the investment for longer than one year and your taxable income for 2016 is not over $37,650 if single or $75,300 if married filing jointly, you can generally avoid all tax on the gain.

There is no tax advantage to be gained by holding an investment for longer than a year in a tax-favored account, such as an IRA or a 401(k), because selling or trading securities in these accounts is not a taxable event.


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