Playing Defense as Stock Prices Soar Part 2 of 2

Wednesday, March 15, 2017

As a follow up to our last blog post, Playing Defense as Stock Prices Soar, here are some additional strategies to consider.

Individual circumstances
All of these strategies have advantages and drawbacks, so you should proceed with caution. Very generally, buy and hold strategies might appeal to workers who are some years from retirement. A market drop may turn out to be a buying opportunity, especially for those who are investing periodically through contributions to 401(k) and similar plans. On the other hand, trimming stocks might be prudent for people in or near retirement. Investment opportunities at low stock prices may be reduced, and a market skid can be particularly dangerous for retirees who are tapping their portfolio for spending money.

Trusted Advice

Treasury bond interest
  • Interest income from Treasury bills, notes, and bonds is subject to federal income tax.
  • That interest is exempt from state and local income taxes.
  • If you invest in a bond fund that holds only U.S. Treasuries, you will owe federal income tax on the interest income but no state or local income tax on that interest.
  • Although the bonds held in a bond fund pay interest, the fund will pay dividends to the fund’s investors. Those dividend payments will be taxed at the federal level as interest income, at ordinary income rates.

Business Tax Accountant South Florida