Client Portals

Your End of Year Checklist4 min read

Dec 9, 2015 - John Osbon ( 6 mins to read)

It’s a great feeling to hit the ground running when the new year begins. If that means starting a new exercise regimen or diet, January 1 is the perfect day to begin. For financial fitness, it’s important to get things in order before the New Year rings in, especially anything related to 2015 taxes. Are you ready for the New Year? If you’re not sure, talk to your advisor…

Anticipate, don’t react

Investment planning trumps procrastination anytime. December is a big month for us at Osbon Capital since we have the entire 31 days to button up any portfolio changes for 2015 and get clients in robust shape for 2016. This is what we are doing:

Tax suppressionshutterstock_62795851

This one works in so many ways and the net result is always the same. You pay less in taxes. There are two ways to suppress taxes: 1) anti-taxing and 2) asset location.

Anti-taxing, also known as tax loss harvesting, means selling securities to generate tax losses to be netted against capital gains. It’s like cash flow magic – your asset allocation remains constant but your tax bill goes down. Trades must be completed by end of year, and you must avoid the IRS’s wash sale rule. This rule prohibits selling one security at a loss and then buying back the same or equivalent security back in the next 30 days. The rule is specific about what constitutes an equivalent – it can be similar, but not too similar. Getting this exchange right is the difference between a tax savings and a tax penalty. We have allowable (and low fee) substitutes for all of the ETFs we use in client portfolios.

Asset location simply means grouping high interest and dividend generating securities in your tax deferred accounts like IRAs, 401ks, 403bs and so on. Successful asset location management requires the ability to see and manage all accounts regardless of manager or custodian. With the Osbon Portal, all Osbon clients have that. Thus, we can manage and/or advise on ALL of the clients assets, even those held elsewhere. If your advisor doesn’t have that capability (most don’t) then at the very least, YOU should see all the information and make sure you have the right kind of assets in tax advantaged accounts.

In our experience most investors don’t practice asset location very well because they have been told they can’t. Raise your expectations. Tell your advisor that’s what you want if you don’t have it now.

Stay in balance

Step two, after tax suppression, is to stay on target with your asset allocation. With all the dislocations and volatility this year, especially in the commodity and currency markets, you are almost certainly off balance versus the allocation you set earlier. The trick is to get back on, and to know when to rebalance. At Osbon Capital we have the ability to know precisely how on or off balance you are through the exceptional portfolio software we utilize. We combine anti-taxing with rebalancing to keep you on track, tax efficiently, when markets throw you off.

Live risk constant

Why is rebalancing so important? Ultimately the answer is risk constancy. When you set your allocation, whatever it is, it is designed to give you, over time, both the desired risk and return appropriate for your situation. When changing security prices drag you out of balance, those risk and return characteristics change. Only by rebalancing can you stay risk contant and return constant. Check with us if you’d like to see if you are still in balance.

“Always On” at Osbon Capital

Anti-taxing, risk constancy and asset location may sound complicated. And to do them precisely and at the right time, they are. At Osbon Capital we are “always on” with this information – always monitoring client portfolios and taking action only when the time is right. We receive detailed push notices when you are too far out of balance, or when there is an anti-taxing opportunity.

At a minimum Osbon Clients are rebalanced each quarter as there is cash flow from dividends to be invested. Rebalancings may be more frequent at times of volatility, like we saw in late August. Studies show that these practices add 75-100 basis points per year in return. That doesn’t sound like a lot, but over a 25 year period, it can mean at least a 27 percent boost for a typical portfolio.

Make sure your New Year starts right by getting your portfolio in order before December 31.

John Osbon –


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