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Wells Fargo's Erik Davidson on how higher tax rates on dividends and capital gains impact your portfolio.
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-- -- more about this for more -- -- higher tax rates on dividends and cap gains mean for your portfolio.
And of course what you can do to get ahead of the fiscal cliff.
Eric Davidson deputy chief investment officer for Wells Fargo private bank joins us now.
Let me ask you.
They're seems to be a lot of panic selling -- -- you know we're getting special dividends and Europe we're harvesting capital gains were sell things at the top.
Should we be doing this I mean are people make in the right decisions based on possible tax hikes.
Well yes good afternoon.
Yeah without question there's a lot of discussion about that the fiscal cliff and the problem for investors is that they don't get the opportunity to kick the can down the road like the politicians do.
And for investors on the backside of the tax mountain there was in fact in income clip -- the -- -- the capital gains side as wells on the dividends out which as you've been talking about.
Well certainly Eric investors stop thinking comes so.
You know what did -- come down for -- dividend stocks because of the highest tax rate -- right around the corner right.
But by no means you wanna be dumping their dividend stocks but for many years investors have been lulled into the fact of not having to think too much about after tax.
Returns because in that -- investments have enjoyed very good.
And very positive.
Will tax rates but going forward investors are gonna have to be picking -- -- -- about what they make.
-- about what they keep.
And so for dividends and investors have been looking into dividends as another source of income by no means you wanna -- get rid of those but.
Just like we talk time and time and time again about diversifying assets when investors more more I've got to be thing about diversifying their income streams as well.
-- -- -- -- stuff than into retirement counts traditional IRAs Roth IRAs even your 401K by a dividend stocks there.
Absolutely yeah once again you know asset allocation is very very important but so is asset location -- want to think about where -- putting those income traditions.
Investments vs where of the capital gains are coming from about fixed income America you know in particular call -- a -- you a fan of those.
Well corporate bonds particularly the short and are -- good place to be particular on a relative basis vs a very very low rates infected.
The negative real rates that you get in treasuries.
And if in fact the worst case scenario happens for this fiscal fiscal cliff where you do in fact have dividends being taxed at.
Effectively 43 point four.
You know what that does is -- really -- school corporate bond coupon income on -- -- level playing field with dividend income.
-- we've certainly -- bond prices of these days though now.
-- David -- that Wells Fargo private bank thank you sharing your thoughts there.
