Little Things Matter
The past few weeks have brought so much news that I’m lacking sleep from trying to read and comprehend it all. There are lots of things, lots of little things. First of all, we are in the midst of tax season. The questions pour in, the CPA’s call, some of the clients have a look of dismay as they come through the door. Here’s a little information that might help:
Little Things Matter
On December 17, 2010, the President signed the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010. The Act does lots of little things. These are the ones that impact many of my clients.
*Current tax rates have been extended.
*Long-term capital gains and qualifying dividends are taxed at the 15% rate for most of my clientele. This has been extended.
*Itemized deductions for higher-income earners are still allowed.
*The Alternative Minimum Tax exemption has increased for 2011.
*Tax-free distributions from IRA’s to charities up to $100,000 is still in place.
The U.S. Equity Markets –
We have seen many good days in terms of rising value in the S&P 500 Index and the Dow Jones Industrial Average. Investors are feeling better. Little by little we keep climbing. I like the pace. I won’t feel particularly bad if a pullback comes. This is the time for active management and asset allocation. No asset class should be overly favored or avoided. Investors are moving, little by little, away from their overweighted cash and U.S. government bond positions and into more diversified portfolios.
What does LITTLE mean?
In terms of investing in the equity markets, “little” can mean different things. There are small-cap stocks, micro-cap stocks, and nano-cap stocks. Generally speaking, most investors are better served by staying at the small-cap level and up. Micro and nano companies have market values typically well under $300 million and are known for their volatility. Many fail and are often targets of fraudulent and manipulative trading.
If you have questions about investing little by little or the risks of investing in little firms, please don’t hesitate to call. No question is too little.
Until next week,
Susan R. Linkous
“Susan On Money”
Note: There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk. The prices of small cap stocks are generally more volatile than large cap stocks.