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Order Your Finances With An Annual Review Checklist

Following a financial checklist can help focus your annual review.
Following a financial checklist can help focus your annual review. Photo Credit: Moneychoice.org

NEW YORK -- Preparing for an annual financial review may be easier with a checklist to help you focus on important matters. With that in mind, here is a partial list of key considerations that you may want to discuss with your financial advisor.

Do I need to rebalance my asset allocation? Depending on the performance of your investments, you may want to examine whether your mix of stocks, bonds, cash, and other assets is close to your target. If you have not reviewed your portfolio lately, you may be surprised at what you find. It's possible that your current asset allocation has changed quite a bit since the last time you checked, due to the different performance of the various investments in your portfolio.1 If that's the case, or if your outlook has changed, it may be time to readjust.

Rebalancing can be accomplished in two ways: You can sell existing assets and use the proceeds to bring your portfolio closer to your desired mix. Or you can leave your portfolio as is and allocate new investments to the areas that you want to increase. Rebalancing may involve tax consequences, especially for non-tax-deferred accounts.

Am I on track to fund my retirement? Making sure you are on track to amass the assets you will need for your later years should be one of your key concerns. If you participate in an employer-sponsored retirement plan, consider investing as much as you can afford. If you do not have access to an employer-sponsored plan, or if you do and can afford to contribute even more, consider funding an individual retirement account (IRA).

What were my yearly capital gains and losses? If your year-end planning entails selling certain assets, be aware of rules regarding capital gains and losses. Gains on investments held less than one year – known as short-term capital gains – are taxed as ordinary income, while those on investments held for one year or longer, or long-term capital gains, are taxed at a maximum rate of 20%, for federal income tax purposes. State tax rules may differ. On the federal level, capital losses offset capital gains and are netted against each other. If net capital losses still remain, up to $3,000 may be used to offset ordinary income. Capital losses not used in a given year can be carried forward to future years. Note that different rules apply for gains on the sale of collectibles, or qualified small- business stock.

You may have additional concerns unique to your situation, but this partial checklist may help you keep your investment portfolio in order. Come back next week for three more items for your checklist.

1. Asset allocation and rebalancing do not assure a profit or protect against loss in a declining market. There may be a potential tax implication with a rebalancing

strategy. Please consult your tax advisor before implementing such a strategy.

If you’d like to learn more, please contact Julia A. Peloso-Barnes , CFP®, CPM®, ADPA®, CPRC®

Article by Wealth Management Systems Inc. and provided courtesy of Morgan Stanley Financial Advisor.

The author(s) are not employees of Morgan Stanley Smith Barney LLC ("Morgan Stanley"). The opinions expressed by the authors are solely their own and do not necessarily reflect those of Morgan Stanley. The information and data in the article or publication has been obtained from sources outside of Morgan Stanley and Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of information or data from sources outside of Morgan Stanley.

Neither the information provided nor any opinion expressed constitutes a solicitation by Morgan Stanley with respect to the purchase or sale of any security, investment, strategy or product that may be mentioned.

Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for eligible, long-term investors who are willing to forgo liquidity and put capital at risk for an indefinite period of time. They may be highly illiquid and can engage in leverage and other speculative practices that may increase the volatility and risk of loss. Alternative Investments typically have higher fees than traditional investments. Investors should carefully review and consider potential risks before investing. Certain of these risks may include but are not limited to:

Loss of all or a substantial portion of the investment due to leveraging, short-selling, or other speculative practices; Lack of liquidity in that there may be no secondary market for a fund; Volatility of returns; Restrictions on transferring interests in a fund;

Potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized; Absence of information regarding valuations and pricing; Complex tax structures and delays in tax reporting; Less regulation and higher fees than mutual funds; and Risks associated with the operations, personnel, and processes of the manager.

As a diversified global financial services firm, Morgan Stanley Wealth Management engages in a broad spectrum of activities including financial advisory services, investment management activities, sponsoring and managing private investment funds, engaging in broker-dealer transactions and principal securities, commodities and foreign exchange transactions, research publication, and other activities. In the ordinary course of its business, Morgan Stanley Wealth Management therefore engages in activities where Morgan Stanley Wealth Management’s interests may conflict with the interests of its clients, including the private investment funds it manages. Morgan Stanley Wealth Management can give no assurance that conflicts of interest will be resolved in favor of its clients or any such fund.

Morgan Stanley Financial Advisor(s) engaged Daily Voice to feature this article.

Julia A. Peloso-Barnes may only transact business in states where she is registered or excluded or exempted from registration

www.MorganStanleyFA.com/pelosobarnesgroup . Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Julia A. Peloso-Barnes is not registered or excluded or exempt from registration.

© 2015 Morgan Stanley Smith Barney LLC. Member SIPC.

Daily Voice produced this article as part of a paid Content Partnership with our advertiser, The Peloso-Barnes Group

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