Tidying up for a prosperous '98

The Ticker

December 24, 1997|By JULIUS WESTHEIMER

WANT TO make smart financial moves for 1998? Here are suggestions:

LOOK IT OVER: At year-end, review your investment portfolio. "Despite the market's dips in late October, early November and mid-December," says Financial Perspectives newsletter, "many portfolios are up for the year -- substantially up in many cases." The letter suggests that you rebalance your list "if the percentage of stocks has gotten significantly out of whack from the investment mix when 1997 began."

MONEY MAILBAG: In this regard Carolyn W., Finksburg, writes, "Would you please explain fully the formula you gave for figuring what percentage of stocks everybody should have?"

It all depends. There's no one rule for everybody because each age group should have different percentages. My guideline, although not carved in stone, is to subtract your age from 120, with the resulting number roughly producing your ideal stock percentage.

If you're 40 years old, for example, the formula gives a result of 80 percent in stocks, which relatively young people need for future growth. And at age 40, you have time and earning power to "ride out" sharp market dips. But if you're 70 the formula leaves you with only 50 percent in stocks, 50 percent in bonds and cash, a reasonable mix. In their later years, most people need less growth, more income and increased security.

CHANGING MIX: This year's stock run-up may have pushed senior citizens from 50 percent in stocks to a 70/30 stock-to-bond ratio, resulting in an expanded stock percent higher than many senior citizens say they want.

In any case, revisit your portfolio at year-end and make necessary changes. Also, the cut in capital gains tax rates may suggest some revamping of your stock-bond mix. See your accountant for personal guidance.

QUICKIES: "Making regular investments into stock mutual funds the ideal antidote for market volatility -- and can help you weather extended downturns," (Money, January.)

"The IRA is the best tax shelter in America." (Primerica's Take Control of Your Financial Life)

Reminder: Pay your Jan 15, 1998, Maryland tax installment and your January mortgage payment this year to get the 1997 tax deduction.

TAX TIPS: Many provisions of the Taxpayer Relief Act of 1997 go into effect Jan. 1. Middle-income taxpayers, especially those with youngsters, should pay close attention to new rules regarding home sales, individual retirement accounts, child credits and payment of college bills.

Pub Date: 12/24/97

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