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Tax Season and your Investments

It’s that time of year again.  Time to get an early start on tax season, from taking required IRA distributions to maximizing your IRA contributions if you are working.  Now is the time to declutter, organize paperwork and speak with your advisor to make sure you are on track with your investment portfolio goals.  Wouldn’t it be nice to head into the new year free of all this stress?  There are many things you can start doing right now.

Soon, investors over the age of 70 ½ will receive their Required Minimum Distribution Letter stating how much of a distribution needs to be taken by December 31st.  This is a specific amount calculated based on your age and the balance of your retirement accounts on December 31 of the previous year.  Roth IRA accounts are excluded from these required distributions.

If you must take annual distributions, you can set up a Periodic Distribution Plan that can be customized to distribute monthly quarterly or annually.  Many investors don’t realize that if you don’t need the money for expenses, you can distribute the funds into an individual brokerage account and continue to invest the proceeds.  The funds are always available to withdraw when income needs arise.

A qualified charitable distribution (QCD) is another option for your required distribution.  The distribution can go directly to your favorite charity/charities.  You can use a QCD to donate up to $100,000/year without being taxed.

For everyone that is working, be sure to max out your IRA each year.  For 2019 you can contribute up to $6,000 if you’re under 50 and $19,000 into a 401(k).  If you’re 50 or over the maximum contribution increases to $7,000 and $25,000, respectively.  It is amazing what the power of compound interest can do when you contribute to an IRA annually at a young age.  For a great article about compound interest you can visit our website at www.investspectrum.com, go to Resources-Our Newsletter and select the April 2019 newsletter.  The article is on the last page.


These are just a few of the steps you can take to get a start on tax season.  By starting now, it will give you time to make any adjustments to your investment portfolio well before any deadlines approach.  At Spectrum Financial we help implement these tax season steps into a year-round process for our clients.  Call us today at 888-463-7600 to learn more about our company and how we can help you by creating investment portfolios to meet your unique goals.

***When maximizing retirement contributions, first consult a qualified tax professional for details based on your personal situation.

A Beginner’s Guide to Buy Low, Sell High

A Beginners Guide to Buy Low, Sell High

 “Buy low, and sell high”, is foundational advice often given to beginning investors in order to avoid losses and lock in gains.  In an attempt to reach that goal, a portfolio manager often draws from the discipline of technical analysis which at its core, focuses on the effects of buying and selling pressures on assets such as stocks, bonds and commodities.  Technical analysis is often contrasted against fundamental analysis which focuses on gauging the financial health of a specific company or industry.  The two can also be blended, introducing an additional discipline, economic analysis.  This post will explore the technical analysis discipline which is diverse.  However, most technical analysis tools can be separated into either trend following or mean reversion categories. 

Understanding how markets move

Markets have two states of movement, either trending up/down or rangebound. A portfolio manager must first use indicators specific to identifying the two states of movement. Think of these technical analysis indicators as tools. Having the right tools for the job plays a significant role in the success of the overall investment process.  Like using a hammer to drive a nail or a shovel to dig a hole versus using the shovel to drive a nail and the hammer to dig a hole.  Once an environment is identified, more specific indicators and methods can be used which may reveal further information about the environment.

Indicators of market movements

Indicators are available to detect various traits of price movement.  If “Point Z” is higher than “Point A”, then an uptrend may be present (though what happened in between could play a role in the investment decision).  Trends may be steady or could be choppy.  Even within a choppy uptrend, it may have various degrees of width in the swings.  Indicators exist that simply define a trend as being positive or negative and tools exist that define the level of volatility within the trend.  Rate of change indicators can identify the percentage movement over a specified time period in order to identify trend.  These indicators also display momentum or if the trend is speeding up or slowing down. Why does all this information matter? The more informed you are as to what is going on with a market environment the better equipped you may be to make risk-adjusted decisions for your portfolio.

Moving Averages

Moving averages (displayed below) are popular ways to identify trends because chart readers can easily see if the asset is above the moving average or below. If the asset is above the moving average the trend can be defined as an “uptrend”.  If the asset is below, it can be labeled as a downtrend.  The number of days used to calculate the moving average can vary in order to detect trends of various time frames such as shorter-term, intermediate or longer-term.

200 day
Created with TradeStation. © TradeStation Technologies, Inc. All rights reserved

Mean Reversion

The “buy low and sell high” concept can also be conveyed through mean reversion methods.  In case that term is new to you, mean reversion simply means the movement is stretched, gone further than it typically does, and may soon snap back.  “Overbought” and “oversold” are common terms associated with mean reversion methods.  If a stock is in a trading range, by definition, it reaches an upper point, or extreme and then goes down toward a mean or average.  It may then overshoot and go to a lower extreme, becoming oversold and then revert back higher.  This process may be repeated numerous times.  Trading ranges may be after an uptrend or downtrend has slowed.  These may lead to a full reversal in overall direction or the trend may eventually resume but at a different slope.  Once a trading range is identified, a portfolio manager must then be able to identify what constitutes the extremes or overbought and oversold zones.  Tools of the trade may include Stochastics, Money Flow Index, and RSI, among others (pictured below).

RSI Money Flow
Created with TradeStation. © TradeStation Technologies, Inc. All rights reserved

Volatility Analysis

Tying the states of trending and trading ranges together may also involve volatility analysis.  If volatility is high enough a trend may be observed and at the same time, upper and lower extremes can too.  These are often referred to as trend channels (see below).  Modest adjustments to exposure are often the goal when trend channels are identified such as the adding of positions around the lower channel line or “profit-taking” near the upper channel line. 

Trend Channel
Created with TradeStation. © TradeStation Technologies, Inc. All rights reserved

Why does this matter?

Many investors take a hands-off approach to investing but that puts hard-earned money at the whims of the changing trends, and some bear market trends can be devastating.  Active portfolio management, by way of technical analysis, often includes implementation of the tools discussed above. These tools detect periods of trending or trading ranges.  Refinements with more specific trading tools and methods within those periods can further increase odds of potential success in navigating the unknown waters yet to be seen. This comprehensive approach to investing is used in Spectrum’s management for its clients.

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Spectrum Financial, Inc 2019