• Take financial stock to start the new year
    January 13,2013
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    The hoopla over the fiscal cliff is behind us. Was there a television news network that did not have a bug on the side of their screen counting down the days, hours and minutes to the point of no return, the moment we were all going to fall off the cliff? The drama.

    When I last wrote this column just before the holidays, I mentioned that the tax deduction for charitable giving might be on the chopping block. That did not happen, but not everything near and dear was left untouched.

    In some ways, there was something good in the deal for everyone, with the exception of those at the tippy-top of the wealth ladder. The Bush tax cuts for singles making up to $400,000 and couples making up to $450,000 will be permanent. For those with estates worth up to $5 million, the lower tax rates will also become permanent.

    If you are receiving unemployment benefits, you have a one-year extension. And for those who loved the 15 percent dividend and capital gains rate, say hello to another 5 percent of your money being taxed.

    For all it did, the agreement did not address entitlement reform, any action on personal or corporate tax codes, and it did not address the looming issue of the debt ceiling. These issues will no doubt take up a lot of time on the congressional clock this term and that will probably mean that other things donít get done, like possibly immigration reform or more global and international issues as we grapple with our domestic financial challenges.

    With so much up in the air, people often ask me what the stock market will be doing in the coming 12 months. I learned long ago never to make predictions ó when it comes to the stock market at least.

    That being said, the markets donít like uncertainty and we have plenty of it right now.

    Uncertainty can breed volatility, sometimes based on the news of the day, so we may see a knee-jerk market at least until some of the financial questions of the day are resolved.

    With interest rates still at historic lows, there probably wonít be much of a change in rates for at least the first few months of 2013. So it would not seem that there will be much excitement either way, up or down, in the bond market.

    From a planning point of view, if taxes are a concern to you, consider putting dividend-yielding stocks in retirement accounts and escaping the taxman that way.

    Also, I canít write a column in January without mentioning retirement accounts. Now is a great time to up that contribution to your 401(k) or start monthly deductions to your IRA.

    Just about all custodians of IRAs allow monthly contributions. Itís much less painful than that all-in-one contribution in April, and your money is compounding and working for your future sooner.

    We know there is volatility out there, and a murky economic outlook and probably slow growth. Take it easy and hold steady to the wheel.

    Diversify your holdings, consider some international exposure as well as U.S. stocks and bonds to cushion an unexpected bump or two. An egg in every basket should mean your investments weather 2013 well.

    Karen Paul is a financial consultant in Burlington.
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