1. Stocks are breaking records
Investors have had a lot to be thankful for in 2013. U.S. stocks are trading at all-time highs, with the S&P 500® Index having broken through 1,800 for the first time ever, adding another 3% in November. The market has gained 29% on a total return basis, year-to-date, including a 2.1% yield. There are a number of reasons to be optimistic that this momentum for stocks could continue through the end of the year, as the economy appears to be solidly in a slow, midcycle expansion. That said, the prospect of Fed tapering in 2014 and a possible softening in housing—pending home sales fell for the fifth consecutive month in October—might necessitate having a plan in place to prepare for potential volatility.
2. Look for value in companies that repurchase their shares
If stocks continue to melt up, one way to generate alpha could be to consider companies that are buying their own shares. Based on our analysis, stock performance for stocks of publicly traded companies that frequently repurchase their shares has been strong historically over the 12 months following repurchases.
3. Year-end moves to make
As 2013 draws to a close, think about performing a financial reality check to help put you on the right track for the new year. Depending on your specific circumstances, here’s a list of just a few things you might want to consider doing before December 31:
- Estimate your tax bill.
- Consider selling losing investments for tax-loss harvesting
- Make an extra contribution to your 401(k).
- Review your investments.
- Take your minimum required distribution.
4. Higher prices? Not yet, but stay alert.
Inflation can erode your portfolio’s purchasing power. While some of our experts expect inflation to be relatively tame over the next 12—18 months, consider protecting your portfolio from future inflation. One way to do so may be to include inflation-resistant assets such as commodities and commercial real estate in your portfolio.
5. Navigate Puerto Rico muni bonds
For many investors, the triple-tax-exempt status of many bonds issued by Puerto Rico has been an attractive option. However, it’s been an extremely difficult year for these securities, as the Puerto Rican economy continues to fare poorly. Yet ongoing structural reforms may make it worth considering segments of this market that might be in a better position, including Puerto Rico Sales Tax Financing Corporation (COFINA) sales tax bonds. Nevertheless, caution is advised.
Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.
Foreign markets can be more volatile than U.S. markets due to increased risks of adverse issuer, political, market, or economic developments, all of which are magnified in emerging markets. These risks are particularly significant for investments that focus on a single country or region.
The municipal market can be affected by adverse tax, legislative, or political changes, and by the financial condition of the issuers of municipal securities. Interest income generated by municipal bonds is generally expected to be exempt from federal income taxes and, if the bonds are held by an investor resident in the state of issuance, from state and local income taxes. Such interest income may be subject to federal and/or state alternative minimum taxes. Investing in municipal bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all tax brackets. Generally, tax-exempt municipal securities are not appropriate holdings for tax-advantaged accounts such as IRAs and 401(k)s.
Changes in real estate values or economic conditions can have a positive or negative effect on issuers in the real estate industry.
The commodities industry can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Commodity-linked investments can be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Past performance is no guarantee of future results.
1. Fidelity Portfolio Advisory Service® is a service of Strategic Advisers, Inc., a registered investment adviser and a Fidelity Investments company. This service provides discretionary money management for a fee.
As with all your investments, you must make your own determination as to whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing these investments by making them available to you.
Exchange-traded products (ETPs) are subject to market volatility and the risks of their underlying securities, which may include the risks associated with investing in smaller companies, foreign securities, commodities, and fixed income investments.
The S&P 500 and S&P are registered service marks of The McGraw-Hill Companies, Inc., and are licensed for use by Fidelity Distributors Corporation and its affiliates. The S&P 500 Index is an unmanaged market–capitalization weighted index of common stocks.
Portfolio Review is an educational tool.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917