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From Euro turmoil to tax policies, Doug Flynn explores the challenges facing individual investors
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Plans -- this from Flynn Zito capital management Doug just quickly here.
It's more than a distraction but how much should investors really be paying attention to what's going on Europe as part of their daily or monthly you know self portfolio updates.
Well I think at most people have some level of international securities and their portfolio if there if there -- invested.
Diversified properly so I mean -- you look at that perhaps as an opportunity longer term but it did in the short term -- -- do you do have to be concerned because there.
The fears of a global recession that are popping up again.
Putting pressure on the market so I don't think you lose sleep necessarily but it's something to take a look at.
There's clearly a lot of noise and we're up one you know 261 day -- down a 130 points the next here and it's in a lot of it is hopes and fears and optimism and you know it all this being bandied about sort of brings us to you portfolio management which is the reason we brought you -- today because.
Yeah you look at stocks you look at an apple and Apple's been a great investment for people who -- held onto it for a couple of Beers or even despondent -- after that Great Recession.
Then what you was maybe 56% holding in your portfolio suddenly 101215%.
Depending on how much you owned.
And that you say this -- so it's wise to -- -- start putting it not letting it just keep run and run and run.
Yeah that's right what happens is there's many reasons to sell a stock or fund and only one of them -- performance but so one of the things you wanna do is take a look at it becomes too big part of your portfolio that's it that's an ideal -- to -- look at it.
And there are times like that stock -- for instance if it's -- 400 dollars you know.
You you might look at that as an opportunity to buy more but would you buy more authority 1012% your portfolio -- but if you had treated as it moved up.
Back down to three or five -- -- -- does sell off a little bit that's opportunity go back and you could you can make a good decision to go back in an -- to something when it's not already overweight in the portfolio.
That's what happens people end up not being able take advantage of those things because they let it you know become a situation where -- the -- now sometimes people just.
Sort of don't pay as much attention they don't following data date or maybe I don't know you know -- -- mean is that Europe.
As I'm sure there's not a one size fits all strategy but what isn't a itself strategy it is sort of a general idea here do you look at.
So the getting greater than 10% in your portfolio sort of the benchmark to step back and look out at.
Well on on on on a stop loss scenario.
Only wanna lose certain amount of money that's in one easy way to do it I'm gonna go anywhere except maybe a 20% loss -- I'm gonna.
Let it.
-- you get out of that we revisit it seems harder to sell a winner than a loser loser people maybe they wanna get their money back but a winner elect hanging you know yeah I think without leaving money on the table yup and in note late ninety's early two -- we were.
I remember trying to get people out of Lucent was it a good stock and a half and and there are several like that.
That had they had they done that they -- suffered the ultimate try DS -- you I think a lot of because that's that's.
And so you have to just take a look at and say you know what we do as we take a look at the targets of the stock and so you know what I expect that it and then what we do is we revisited.
It doesn't get automatic sell -- you we look at it one of the easiest ways to do this to say what I buy it again now.
At the current price if you would not.
Forget what sizes in the portfolio but if you would not -- taking -- the first indicator that media should start looking at it and then its rules of thumb -- it to three to 5% that's that's what.
Professional money managers through and you should probably mind -- to some degree as well it's a good starting point.
-- went in quest for a portfolio management.
We're talking a little bit about FaceBook and so if you did participate early and you've loaded up.
And then you're probably.
Wondering what to do right now wondering about a -- strategy but you're also not necessarily gonna want to add to the positions even though it's now below if you -- did -- 38 but should -- be -- it even more.
When -- you should right that's right now we can get into whether or not you know paying seventy or eighty times earnings.
For the next apple or Google which are trading at ten or twelve times -- Is something you want to do.
But yes you you you cannot add to it.
If you loaded up on something like that with the hopes that it that those -- that's that's that's gambling bright but if it was a small percentage of portfolio that you added because you like the opportunity.
This you know this represents an opportunity perhaps -- when it it's gonna go.
But you.
You you have to accept the fact that you might not have if it goes up and you and it doubles.
-- you would have made more money had you done more of it but I often advise people to -- listen but everything getting going and going about.
If it goes up tickets away from -- there's always something else to -- right but that does come down did they don't the other half it's an opportunity to average down your -- on the buy side.
-- let's talk a little bit about taxes we have no idea for how -- how many years running now what our tax policy is gonna be next year for investors.
You're you're advising some -- to accelerate gains into this year to pay the known vs the unknown.
That's right so we're rebalancing a portfolio like in the last twelve months growth stocks are up 9% and value stocks are down three months -- about it so.
There's perhaps some gains on the growth side -- portfolio.
Most will just let them.
Let them go but if we were to take advantage of that creates some gains at least start rebalancing didn't take advantage of those things he starts thing on my create some gains the portfolio the president's paid taxes on.
So we have this conversation with clients and as -- -- -- was saying you know wait a second.
Give -- the portfolio and you leave that.
And then you realize the next year or the year after.
You could -- be pushing off a tax bill.
Higher tax bill now and you -- realize and so as a motorists were saying maybe we start.
Realizing more -- -- -- most years the end of the year we go through local attacks let's cultivating friends who we pick -- losses try to book votes.
This year it's kind of the opposite maybe get -- you aggressively take the gains both and that the maximum ten or 15% capital gain that you have.
This is -- -- right we -- have as a possible 45 for dividends next year dividends and then you have on capital gains may be going up and in this surtax -- from further health insurance so you're saying you know if I have the where with all I can do it it's a strategy were several clients -- -- -- conversation with an.
And it said you know what.
Take me out let's reset.
At this point in time.
And I'll pay the taxes and now I only pay from here in the future that whatever the future rate is because you're sitting on our thousand dollar gain and you delay a couple years in tax rates go up.
You've lost that 50% capital gains -- What does -- -- to have you back when we have a little more visibility or if we don't started to revisit this and and some other strategies as well but today's with Flynn Zito capital management thinks so much for joining us here.
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