Your Money: Rebalance portfolio tax-efficiently

Posted: December 18, 2013

The U.S. equity market is on a tear and has now gone 82 weeks without a three-week losing streak - one of the longest rallies in the past 40 years. Will the streak end?

Possibly, but in any case, you've probably made some serious profits in stocks in 2013, and now is the time to rebalance - meaning, sell some equities, take some money off the table.

But do so in a tax-efficient way, advises Donald DiCarlo, managing director of wealth advisory services for Wilmington Trust in Villanova.

"With the addition of health-care taxes and more limited deductions, people may not realize there's going to be serious sticker shock come April 2014," when your tax bill comes due, he says.

For example, if your portfolio holds 70 to 80 percent stocks, sell some to rebalance back to 60 percent stocks, 30 percent bonds, and the remainder in cash.

"Do it tax-efficiently," he advises, selling stock with the highest basis (the stock you bought at the highest price), and selling your losers to offset the gains you book.

Wilmington Trust's newly published "Top Ten Year-End Planning Tips" offers tax-reducing suggestions; advice on the new 3.8 percent surtax on investment income; year-end estate planning tips, taking advantage of low interest rates; setting up a 529 education plan; and, for business owners, why they should take advantage of tax provisions that are about to expire.

The full paper is available on M&T Bank's Wilmington Trust website (

Going for 'real assets'

We caught up with Paul Brodsky, portfolio manager for Kopernik Global Investors in Tampa, Fla., where the University of Pennsylvania graduate told us what he's avoiding and what he likes in the markets these days.

Brodsky serves as a co-portfolio manager of the Global Unconstrained Fund, and says developed countries like the United States and Japan will continue devaluing their currencies to such an extent that it could ultimately hurt bondholders and savers.

Instead, he likes what are known as "real assets" - farmland, precious-metals miners, energy, or anything that businesses need to operate.

"We want to invest in anything that has a brand with pricing power in an inflationary environment, as Warren Buffett talks about in his portfolios, such as Coca-Cola," Brodsky says.


comments powered by Disqus