Capitalizing on the Santa Claus Rally
One of my friends sent me a Facebook message last week asking for some investment advice. She was planning on cashing out her 401K in December and wanted to know what I thought about it. I recommended holding off until the first week of January instead. Not only could her investments increase quite a bit in the next few weeks, she could push the Capital Gain into 2022 and put off paying the taxes until April of 2023.
Year-End Bonus
The Santa Claus rally generally happens between Christmas and New Year’s Day, which carries over into the January Effect for the first week of the new year. There is some debate about these dates, but the year-end performance of the stock market is well known and understood. I have written about this many times, so I will spare you from a long-winded explanation. What I will say is strategizing at the end of each year can put your investment portfolio way ahead.
If you’re not familiar with the Santa Claus Rally or the January Effect, you should definitely read my two posts below on the subject.
I’m already seeing some bah humbug articles doubting the Santa Claus Rally will happen this year, but I also see the market going up and earnings are though the roof this quarter. Barring some unforeseen catastrophe, I think we are in for a solid gain this month. I’m always optimistic and hoping for a Christmas Bonus from the market.
Maximizing Gains
I had another great year in the stock market in 2021 and I’m sitting on some sizable gains in my taxable accounts. In order to maximize my gains and defer my taxes as long as possible, I’m going to cash out some of my big winners next month. I’m also going to wash out some of my losers to soften the tax blow. I already dumped some of my stocks this month, just so I wouldn’t have such a huge tax liability next year. I hate paying the taxes on my capital gains, but this is a good problem to have. I wish I had this problem at the end of every year.
Merry Christmas, Happy New Year and I Hope you Prosper in 2022!!!
The Bottom Line
Investing in the stock market can seem like you are just hanging on for the ride, but there are many small things you can do to maximize gains and minimize liabilities. Take care of your investments and they will take care of you.
“The most contrarian thing of all is not to oppose the crowd but to think for yourself.” – Peter Thiel
