By John Olerio, Director, Senior Vice President Webster Investment Services
Resolutions about diet and exercise aside, the New Year is always the right time to make one firm commitment: to take a fresh look at your long-range goals and investment planning. After the rough ride of the past year, let’s begin with two cautions:
- In times of volatility—i.e., when the Dow drops 600 points in one day— some investors are tempted to overreact and sell.
- Others make the mistake of gritting their teeth and hoping for the best. They just do nothing.
Both approaches should raise huge red flags. The fact is, if you’ve created a financial plan to address your long-term goals, the best advice may be to stick to your plan—but carefully recalibrate your portfolio on a regular basis.
After a flat year, where to turn?
Looking back, after a 2017 market that performed vigorously, 2018’s results have been flat, pretty much across the boards. However, that’s no reason for a dramatic course correction—we’ve had years like 2018 before, and with thoughtful investment moves, there is still plenty of opportunity for growth.
Equities continue to have room for improvement, and our ten-year bull market, while winding down, may not have finished its run.
Sure, there will continue to be headwinds: The uncertainty over tariffs and the almost-certainty of more interest rate hikes continue to cloud the future. They’re reasons to carefully reconsider your portfolio positions, and make prudent decisions for the road ahead.
Options for a hedge against volatility
For example, consider alternative investment products that may serve as a hedge against volatile market cycles. These products are not without complexity, which is why they warrant a discussion with your financial planner. See how they fit within your overall portfolio and risk tolerance profile.
Investors concerned about the market roller coaster should explore all their options to attempt to mitigate downside risk, including ones you may not know about.
Good news on the tax horizon
There’s plenty of good news, too: In 2019, most consumers will see the first fruits of the 2017 Tax Cuts and Jobs Act: an increase in tax savings. That may encourage more people to invest in their future.
The fact is, people have been reducing their debt prudently in recent years as they look five or ten years down the road to retirement. We’ve seen that after the Recession, they have become more risk-averse. Now they have an opportunity to put more money away, but it’s wise to stick with your established long-term plan and the risk profile that lets you sleep at night.
A crucial portfolio consideration: Health Savings Accounts
As the New Year unfolds and people focus on their goals, retirement of course looms large. One area we encourage our clients to consider is healthcare planning—anticipating what is potentially the biggest expense in later years and a possible threat to their financial security.
For this reason, we advise clients to look into a Health Savings Account (HSA). It can be as crucial to their plans as an IRA or 401K. But unlike those plans, an HSA has a triple tax advantage: It allows investors to contribute pre-tax dollars, lowering their current taxable income. They can accumulate funds in equities for long-term tax-deferred growth potential, and then take tax-free distributions when used for qualified healthcare expenses during retirement.
The importance of taking a holistic view
As you look to Q1 2019, look to Webster Investments for the guidance you need to weather the storms and build for the future. We have the advantage of reviewing all the facets of your financial picture—investments, Health Savings Accounts, loans and banking—with that all-important holistic view, based on your unique situation.
Webster Investments has long-tenured investment specialists right in your community. They’re committed to the close personal contact that investors want and need. You can have an ally keeping watch over your portfolio, proactively recommending refinements to keep you on course. No matter where the markets go, close communication is the key to confidence.
The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual.
Investing in equities involves risk, including loss of principal.
Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult your tax advisor regarding your individual situation. All loans and lines of credit are subject to credit approval. The Webster symbol is a registered trademark in the U.S. Webster Bank, N.A. Member FDIC.
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