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Three Easy Ways to Reduce Year-End Planning Pressure

What to do when helpful advice collides with holiday reality.

Besides gingerbread men and long strings of colored lights, there's another sure sign the holiday season has arrived: stress. Soon you'll be scrambling to make vacation plans, hurrying to pick up relatives from the airport, keeping an eye on bored, restless children, and negotiating traffic-choked parking lots to find the perfect last-minute gifts--all while an unexpected winter storm coats the streets with snow and ice. Why, you wonder, do financial writers choose this, of all times, to unleash a barrage of urgent investment advice?

We're among the guilty parties. But please don't be too hard on us: Our suggestions are logical and useful and can truly help you. However, I recognize that you might feel overwhelmed at this time of year. So here are three time-saving, anxiety-preventing tips that can help you survive this hectic season with your sanity intact.

Postpone Your Portfolio Review
What? Am I really telling you to violate the foundation of all investment advice--to periodically examine your overall portfolio and make reallocations if your weightings have gotten out of whack and replace funds that have become chronic laggards?

Well, no. I don't want you to forgo this exercise. It's a sound practice. But while many financial-planning gurus suggest that you conduct this exercise around year end, I suggest that you choose the best time to do it. For many of you, December and January might be the very worst months to try to set aside an hour or two for the peaceful contemplation of your portfolio.

No problem. Do it in February. Or May. If you're a teacher, summertime might be your choice. If you're a member of the Chicago Cubs, pencil it in for mid- to late October, when you're sure to have some free time. The point is, don't feel pressured to do a full portfolio review in the next few weeks. In fact, rushing to cram it in around year end might lead you to make mistakes.

Don't Sweat the Distribution
We often warn investors against investing in a mutual fund right before it makes its year-end taxable distribution. Recently, at the end of a Fund Spy column we supplied a list of fund Web sites where you could check fund distribution dates and amounts. This advice makes a lot of sense. There's no reason to incur an immediate tax bill on gains you weren't even on board to enjoy.

But be careful not to get so caught up in distribution worry that you defeat the purpose. For example, maybe in trying to be conscientious, you did check the distribution schedule of a fund you'd been planning to buy and made a mental note to wait until mid-December, right after the distribution is paid out, to buy the fund. The danger is that when that time rolls around, you might be so frazzled you'll forget to invest. Next thing you know, it's the middle of January, you never invested, and the fund has since gained 10%. (Of course, it could lose money, too, but hey, I'm trying to make a point here.)

One solution is to go--right now--and write down on a specific date in your calendar, "INVEST [SPECIFIC AMOUNT OF MONEY] IN [SPECIFIC FUND] !!!" And yes, it has to be in all capital letters, and underlined, with three exclamation points. That's only a slight exaggeration: If you don't make this a top priority for a specific date, you may well forget. And given the amount of money involved, that task is likely to be far more important than some other items you've carefully inscribed on your to-do list, such as remembering to buy wrapping paper or Scotch tape. As a result, you may feel a welcome wave of relief when you've accomplished it.

An even simpler solution is to invest without regard to the distribution. For example, you don't have to wait at all if you're investing in a tax-sheltered account such as an IRA. And even in a taxable account, if the distribution is tiny, the tax on it might come to a negligible amount. The fund could gain that much, or more, during the weeks (or months) you're waiting on the sidelines in an effort to save a few bucks. Even if you do come out on the short end by a small amount, you may consider it a fair deal if investing now takes an important concern off your mind before the most stressful part of the season kicks in.

Reconsider Tax-Loss Selling
Another sound piece of advice you frequently hear this time of year is to consider selling a stock or fund that you've accumulated losses on, in order to save on taxes. I won't disagree with the logic in general. But does the move make sense in your particular case? Is the size of the loss and of the consequent tax saving truly worth the effort? Depending on whether it's a load fund or has redemption fees or other charges, you may have to actually pay extra money just to sell and/or buy it or to purchase a substitute. If it's a good fund, it's quite possible that simply hanging on to it makes the most sense for you right now.

In short, tax-loss selling, waiting to buy after the distribution, and doing comprehensive portfolio reviews can all be extremely helpful exercises in the right circumstances. But you can ease your mind during a difficult time by adapting the advice to your own situation. That way, you'll have a better chance of enjoying the holiday season.

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