To improve your chances of attaining your long- term investment goals, you need to make the right moves and one of the smartest moves you can make is to put away as much as you can afford, year after year, into tax-deferred investments such as your 401(k) and traditional IRA.
When you contribute to a tax-deferred account, your money has the potential to grow faster than it would in an investment on which you paid taxes every year. Over time, this accelerated growth can add up to a big difference in your accumulated savings.
Of course, you will eventually have to pay taxes on your investment, but when you’re retired, you might be in a lower tax bracket. And depending on how much you withdraw each year from your tax-deferred account, you can have some control over your taxes.
The more years in which you invest in tax-deferred accounts, the better. So start putting the power of tax deferral to work soon.
Sell Investments for the Right Reasons
It’s important to understand what investments to own, and when to buy them. But you should also know when it’s time to sell an investment and why.
Some people own investments that have lost value, and, fearing further losses, they decide to sell thereby violating the oldest rule of investing: “buy low and sell high.”
Instead of reacting in this way, consider holding your investments until you have good reason to sell. For example, if your goals have changed, your existing investment mix may also need to change. Also, it may happen that the investments themselves have changed in some way, so that they may no longer meet your needs.
In addition, if you need to rebalance your portfolio to align with your risk tolerance, you may need to sell some of your holdings.
In any case, think carefully before putting up the “For Sale” sign on your investments.
Contact Wendell at Edward Jones www.edwardjones.com.