Your Money: Good time to take stock profits

Posted: December 05, 2013

Hard to believe, but as of Wednesday, there are fewer than 20 trading days left in the year. So, if you want to take profits in your stock portfolio, now would be the time.

Almost all major asset classes except commodities have posted gains this year: The S&P 500 equity gauge has rallied 26 percent, on pace for its biggest annual gain since 2003, and reached an all-time high on Nov. 27.

The 2014 market is unlikely to match 2013's stellar gains.

"Equities may post further gains in the year ahead, despite the strong runup this year and the abiding potential for some pullback," notes Sage Financial Group, of West Conshohocken, in its latest note to investors. "We encourage clients to temper their expectations for the size of near-term stock and portfolio returns.

"Looking ahead to 2014, we believe that overall portfolio returns will be decent, but they will likely seem unimpressive when compared to portfolio returns this year."

Another sign that stocks could lumber along next year: Inflation remains low in the United States and Europe. Headline inflation through September in the United States was 1.2 percent annualized. This low inflation should help to contain input costs to businesses.

Also, there remains a huge gap between money flows into bond funds in recent years vs. stock funds, Sage added. Although U.S. bond interest rates and yields are still near historic lows, investors have, in recent years, significantly piled more money into low-yielding bond funds than into equities.

In 2014, however, bond investors are likely to realize that investment-grade bond funds in particular will not, in the coming decades, provide the sort of returns and low volatility that they have over the past 30 years. The initial conditions now are the reverse of what they were in 1983.

If you are brave enough, financial adviser Kevin Tierney, of KJT Investments in New York, says he is waiting until the new year to put a "short" bet on bonds: Buy the ProShares UltraShort 20+ Year Treasury (symbol: TBT) exchange-traded fund, which seeks investment results that correspond to twice (200 percent) the inverse (or opposite) of the daily performance of the Barclays Capital US Treasury 20+ Year Treasury Bond Index.


erinarvedlund@yahoo.com

646-797-0759

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