No, the Fiscal Cliff is not a game. It’s real.
Baring the unexpected, a $500 billion cocktail of tax increases and budget cuts will kick in on January 1, 2013. You owe it to yourself to be prepared.
Especially since there are THREE simple actions can protect you and your loved one — but only if you take them by yearend 2012, and preferably sooner.
Most importantly, all three moves are designed to maximize your bottom-line returns AFTER accounting for all friction costs, including higher taxes — and thus can bolster your wealth for generations, regardless of what transpires on January 1, 2013.
If, like most investors, you’re concerned about the Fiscal Cliff — and the threats, ranging from higher taxes to plunging markets, are real, if not certain — please read on. These three simple steps can protect you, but only IF you take them by yearend.
Step #1—Locate your assets
Asset location, is the key to this step. If you’re not familiar, the term was coined to highlight the overlooked role played by another important decision: namely WHERE you hold your various types of investments—more specifically, in what type of investment accounts.
Specific details on which accounts you should hold which assets in are in my new report online now.
Step #2—Harvest your winners and rotate
into companies with strong, dependable GROWTH
If we do go over the Fiscal Cliff, we’ll almost surely dip back into a mild recession. In which case, you can expect a temporary pullback in equity prices. Even in the best case, the mere news of a recession will throw cold water on any broad market rally.
This is NO TIME to have your money exposed to marginal businesses, “cigar butt” asset plays, mature, slow-growth operations, overleveraged insurers and money center banks, or hopeful turnarounds of any kind.
If you are fortunate to be sitting on capital gains in companies or mutual funds that you suspect may be overvalued, headed for trouble, or have simply run their course, consider selling and taking your profits now.
Step #3—Minimize your costs and…
MAXIMIZE your returns
I’ve heard the current market environment described as “the triple threat” facing investors today: namely, the risks posed by higher taxes, higher costs, and rising inflation in a low-yield environment.
The implications are two fold. First, it’s an overlooked fact that the LOWER the returns you can expect from your investments going forward, the MORE important it is to minimize all friction costs—including management fees and taxes.
And you must take any and all steps to MAXIMIZE your returns. In my view, this means paring back on U.S. Treasuries, cash and other assets that offer negative real yields—and increasing your exposure to the growth potential of world’s best-run companies.