3 Spring Cleaning Ideas for Investors

by Marc Bastow | April 24, 2013 7:00 am

Now that we’ve all had a little taste of spring — some warmer temperatures, the sight of buds on the trees, a couple baseball games — it’s time to get back in the house and get to spring cleaning.

Of course, that’s not just limited to beating the rug or wiping the windows. No, you’ve also got to get your financial house in order. That means taking stock (sorry) of your investments, or maybe taking care of some paperwork.

Here are a few ideas to get you started:

Thin the Document Herd

Obviously, you’ve already completed this year’s return. Now, however, it’s time to clean house on those tax returns and backup data that are no longer needed to comply with U.S. or state regulations.

There are quite a few IRS rules to follow[1] in the case of keeping your returns and all supporting documentation, but the minimum period of time is three years from the latest return filed. Arthur J. Dykes, a tax partner in the Private Client Group at  McGladrey LLP, says he and many of his peers recommend taxpayers hold onto returns and files for seven years. Thus, in the case of your federal returns, you can either whittle down or eliminate altogether returns prior to 2007.

State returns might be a different matter. Most states follow the federal guidelines; however, these states[2] have varying rules, so you’ll have to look at your own state’s rules before breaking out the shredder.

Note: Before you do a straight paper dump, remember than in cases where either the federal government or state suspects fraud, all bets are off, and you’d better have documentation to support your case.

Update Your Portfolios

If you have more long-term “set it and forget it” investments, now’s a good time to break out the most recent statements and find out how you’re doing and, if you think it’s prudent, make some adjustments.

If you’ve been lucky enough to have shares in some of Q1’s big gainers[3] like Johnson & Johnson (NYSE:JNJ[4]) and Pfizer (NYSE:PFE[5]), or maybe housing names like those in the iShares Dow Jones U.S. Home Construction Index Fund (NYSE:ITB[6]), congrats. But especially in areas where the gains have been particularly outsized, consider taking some profits and possibly rotating elsewhere.

And where the portfolio has been uglier, review the situation and consider whether you believe your holdings’ difficulties are short lived — if not, don’t be afraid to clean house altogether and find better opportunities.

Safety and Security Issues

Something else you’ll want to peruse: checking, savings and other statements that involve activity and balances.

You see, sometimes we forget about recurring charges put on a credit card or run through as an automatic debit in an account. Thus, it’s a good idea to keep track of what’s coming in and going out of each account.

Also worth checking: What fees you might be paying on said accounts. ATM fees can add up. So can management fees in your portfolio. And should either type of fee — or others — be too onerous, don’t worry … there are almost certainly some lower-cost options out there.

More importantly, make sure you’ve authorized all the transactions going in and out over the past few months. This is especially important in the case of credit cards, which will go through with you and take care of fraudulent charges — unless too much time has elapsed. You should try to monitor your activity daily if possible, but if you don’t, make sure you’re at least doing it to some regular extent.

Last but not least, remember you have the ability to check on your credit status at any of the three major credit reporting agencies — Equifax, Experian and TransUnion — once per year for free. Not only is that information good to have in the event that you plan to make a large purchase in the near future, but it also can help alert you to fraud.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he was long JNJ.

  1. IRS rules to follow: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-long-should-I-keep-records%3F
  2. these states: http://taxes.about.com/od/statetaxes/a/tax-audit-statute-of-limitations-by-state.htm
  3. Q1’s big gainers: https://investorplace.com/2013/03/the-5-best-5-worst-djia-stocks-of-q1-jnj-vz-xom-cat-aa/
  4. JNJ: http://studio-5.financialcontent.com/investplace/quote?Symbol=JNJ
  5. PFE: http://studio-5.financialcontent.com/investplace/quote?Symbol=PFE
  6. ITB: http://studio-5.financialcontent.com/investplace/quote?Symbol=ITB

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