Spring is here, bringing renewal and promise. It’s the perfect time to get in the spirit of the season and refresh your investment portfolio. The second quarter of 2015 just began, which means you have plenty of time to capitalize on this year’s most promising ideas for young investors.
Mitigate Your Tax Burden
When you invest, don’t overlook the tax consequences. With very active funds, you might find yourself slapped with a hefty capital gains tax and a heavier tax burden in general. Assets like these are "tax-inefficient" — they might net you some handsome returns, but they will also put you in hock to Uncle Sam. To minimize these consequences, try moving your tax-inefficient assets into an account with tax-deferred status.
Don’t Be Afraid of Unpopular Picks
The great thing about unpopular areas of the market is that their stock usually comes cheap. Try channeling your gains from 2014 into the sectors that significantly underperformed. Specifically, try looking into mining, materials, and natural resources companies.
Go Bargain Hunting
You might think bargains are impossible to find in a bullish market, but you’re wrong. As long as you’re willing to do your homework, you’ll find that the market offers plenty of bargains. Look for stocks with a price-earnings (P/E) ratio of less than 18, the average for Standard & Poor’s 500. You might also look for a price-to-sales ratio of less than 1.0. If this approach to investing interests you, consider beefing up your knowledge with a master’s in analytics.
Reach New Heights with Airlines
Airline stocks have skyrocketed with dropping oil prices, but not all airline stock prices are prohibitive. For example, Republic Airways Holding has a P/E of 9.4, which is almost half the S&P 500 average of 18.
Have Faith in Trucking and Transportation
The recovery of the transportation industry has kept pace with that of the economy, but this sector remains unloved by investors. Bargains are everywhere in this industry. For instance, Meritor has a P/E of 10.5, and the company expects double-digit earnings growth in 2015.
Don’t Neglect Bonds
Interest rates will likely rise at the end of 2015. This means it’s time to revisit the bonds in your portfolio. Investment strategists recommend redirecting money from bond funds into individual bonds with maturities of eight years or fewer.
Quit While You’re Ahead
If you’re looking to sell, assets that have appreciated more than historical averages should be at the top of your list. The more the market appreciates, the more risk rises, and future returns decline with these investments.
Jettison High-Performing Asset Classes
When certain asset classes skyrocket one year, they are highly susceptible to plummeting the next. Try trading in your booming asset class for an undervalued one.
Look for Undervalued Stocks in Overvalued Sectors
Remember not to dismiss an entire sector simply because it is mostly overvalued. Health care stocks, for example, are generally overvalued, but companies like Merck and Baxter International remain underpriced.
Watch Retail Trends
Experts predict that retailers will have a good 2015 due to higher spending from lower-income consumers. Some of the stocks to buy or watch include Gap (GPS) and PVH Corp.
The year 2015 should be a good one for the market. With these tips, you can leverage the year’s trends to update and strengthen your portfolio.