The Value of a Year-end Investment Review

As we approach the end of the calendar year, the financial landscape continues to present investors with both challenges and opportunities. An investment review and a disciplined approach to diversification can help weather market volatility and capitalize on opportunities as they arise.

The Importance of Diversification

Diversification remains a cornerstone of sound investment strategy, especially during market volatility. Investors can potentially reduce risk and enhance long-term returns spreading investments across various asset classes, sectors, and geographic regions.

Asset Class Diversification

The optimal mix will depend on individual factors such as risk tolerance, investment timeline, and financial goals.

Sector Diversification

Within equity investments, spreading holdings across different sectors could help mitigate risk:

• Technology
• Healthcare
• Financial Services
• Consumer Goods
• Energy
• Utilities
• Real Estate
• Communication Services

At David Lerner Associates, John Fielding, Senior Vice President of Investments, suggests, “Regularly reviewing sector allocations to ensure they align with your investment strategy and current market conditions is key.”

Geographic Diversification

In an increasingly interconnected global economy, geographic diversification is a possibility:

• Domestic Markets: Familiar regulatory environment and reduced currency risk
• Developed International Markets: Exposure to established economies outside your home country
• Emerging Markets: Potential for higher growth, albeit with increased risk

Always take a balanced approach, considering the opportunities and risks associated with each geographic region.

Optimizing Tax Efficiency Through Strategic Rebalancing

As the year-end approaches, it’s an opportune time to consider tax-efficient rebalancing strategies:

1. 1. Tax-Loss Harvesting: Sell underperforming investments to offset capital gains, potentially reducing your tax liability.
   2. Asset Location: Place tax-inefficient investments in tax-advantaged and tax-efficient investments in taxable accounts.
   3. Qualified Charitable Distributions (QCDs): For those aged 70½ or older, consider making charitable donations directly from IRAs to satisfy Required Minimum Distributions (RMDs) without increasing taxable income.
   4. Roth Conversions: Evaluate the benefits of converting traditional IRA assets to Roth IRAs, especially in lower-income years.

Investment Limits for Different Account Types

Understanding and maximizing contributions to various account types can optimize your investment strategy:

1. 401(k) and 403(b) Plans:

• • 2024 contribution limit: $23,000
  • Catch-up contribution (age 50+): Additional $8,000

2. Individual Retirement Accounts (IRAs):

• • 2024 contribution limit: $7,000 ($8,000 if you are 50 and older)

3. Health Savings Accounts (HSAs):

• •  The 2024 contribution limit is up to $4,150 if you are covered by a high-deductible health plan just for yourself, or $8,300 if you have coverage for your family.
  • Catch-up contribution (age 55+): Additional $1,000

4. 529 College Savings Plans:

• • No annual contribution limit, but be aware of gift tax implications for large contributions

As you prepare for the year ahead, meet with your investment counselor to review your portfolio diversification strategy and consider the insights in this article. Remember, in investing, preparation, and adaptability are your greatest assets.

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Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.