How I Spent My Summer Vacation


There are numerous catch phrases around that speak to the activity of investing. One of the many oft quoted is, “Get out in May and stay away.”

Over the last few months many of my clients were advised, based on their individual situations, to seek shelter for the summer and sit on the sidelines while the markets digest the sovereign fiscal issues in Europe, the looming fiscal cliff at home and the elections this Fall.

With all these events as a backdrop, one should ask oneself, is the market more likely to gain 10% this summer or lose 10% this summer? If history repeats itself much like the last two summers (although we always caution that past performance is never a guarantee of future performance), then weakness in the markets, translated as drops in the major indices, could be a result. The end of summer is just around the corner. Looking back, we saw the markets decline in April, May and June from the March highs, eroding most of the early calendar gains from January 2012. What does this mean for you?

Not everybody should run and hide for the summer, but a good understanding of your goals and intent should be discussed with your advisor to determine what is best for you. Not all of my clients were put on the side for various reasons. Sometimes the need for cash flow prohibits a sideline dash. In any event, it is important to communicate what you’re objectives are for your accumulated savings for any advisor to give you a more collaborative and tailored financial plan.

When we are facing continued uncertainty, and the markets do not like uncertainty, then it is even more important to review your holdings to determine if you are still comfortable and confident that your savings are supporting what you have in mind.

Over the years, I have seen data which show that the most positive periods of time for market indices are the months of October to April, however please remember that past performance is no indication of future results. The market’s overall performance in the last four years has been proof of that.

Among the looming issues on the domestic front is the expiration of the so called “Bush Tax Cuts.” The original sunset on these regulations was 2010, but budgetary horse-trading saw a temporary extension, so they are now due to expire on December 31, 2012.

In my opinion, it is critical that you review your holdings and your estate plan BEFORE the end of this year. You may wish to determine if tax preferred holdings will be better suited for your situation, as we head into a new era of increased income tax rates for ordinary income, capital gains income and dividend income. Additionally, with the anticipated end to favorable estate tax issues, such as a drop from $5,120,000 to $1,000,000 for the transfer of estates that avoid the estate tax, it would be extremely wise to revisit your estate transfer plans. For those of us living in Ohio, the estate tax expires on December 31, 2012, which should be good news, but a review of all your estate transfer plans should be reviewed and if necessary, upgraded.

So, how are you spending your summer vacation? And what are you doing to make sure your plans are still viable for your financial goals and objectives? With all of the looming and possible market-changing events, would you agree that it might be a good time to contact your advisor for a review?


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