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How to Manage Your Investment Portfolio Over the Summer

Rebecca Lake

As the lazy days of summer tick by, investors can't afford to be lazy when it comes to portfolio management. While market activity in terms of seasonality may hit a lull, it's still important to stay on top of investments during the summer months.

"It's natural to expect the markets to slow down and possibly become choppier in the summer; that's where the phrase, 'sell in May and go away,' comes from," says Todd Baker, co-founder of Legacy Capital Planners in Germantown, Maryland.

Specifically, there are two broad trends that can happen over the summer season, says Grant Engelbart, senior portfolio manager and director of research at CLS Investments. The first is the trend that trading volumes decline and the second is that equity market returns are comparatively slower than other seasons such as winter to spring.

Engelbart says that historically, in terms of seasonality trends, the June to August stretch is one of the worst periods for returns for the S&P 500.

It's possible, however, that the stock market may contradict that thinking for this summer. "With the already low interest rates and potential for another interest rate cut this year, we could see some more movement and the potential for continued growth in the markets," Baker says.

The Federal Reserve hasn't committed to a rate cut but if that happens later in summer, stocks may get a boost. In between celebrating the summer holidays and booking vacations, it's good to keep an eye on a portfolio investment strategy.

Here are five rules for managing a portfolio during the summer:

-- Study summer investment trends.

-- Take a personal investment inventory.

-- Rebalance and work on tax planning.

-- Schedule an advisor check-in.

-- Avoid the fear of missing out.

Study Summer Investment Trends

School may be out for the kids over the summer but it's a good time to learn the ins and outs of stock market movements.

Scott Kubie, senior investment strategist at Carson Group, says the current market is a "golf cart market".

"One characteristic of golf carts is they start fast but hit their maximum speed quickly," Kubie says. "We expect the same from this market. Sharp rallies that hit the ceiling as the slowing economic environment, valuations and trade risks will likely restrain the market from picking up too much momentum."

[Read: 5 Ways to Build a Conservative Investor's Portfolio.]

Albert Brenner, director of asset allocation strategy at People's United Bank, says this summer has the potential be more active owing to continuing economic expansion, the potential for interest rate cuts, trade wars, geopolitical tensions and the early buzz surrounding the 2020 election.

"There's a lot for the markets to digest," Brenner says. "As events unfold this summer that impact any of these items, they're likely to impact the markets."

Having some perspective on factors that are shaping or have the potential to shape the stock market over the summer can help in maintaining a balanced investment portfolio.

Take a Personal Investment Inventory

Charlotte Geletka, managing partner at Silver Penny Financial, says a summer slowdown is an opportunity for people to review and organize their portfolios.

"If you're contributing to a 401(k) or [an individual retirement account] through periodic contributions, then check to see how much you've contributed to date and how much you need to make the annual limits," Geletka says.

For 2019, the 401(k) maximum contribution is $19,000, not including the additional $6,000 allowed for catch-up contributions for those age 50 and older. The limit for traditional and Roth IRAs is $6,000, or $7,000 for those who are eligible based on their age to make catch-up contributions.

[Read: 3 Tax-Deductible Investment Expenses You Should Take]

Also, consider opportunities to maximize other tax-advantaged accounts.

A health savings account, for example, allows for tax-deductible contributions, tax-deferred growth and tax-free withdrawals when used for qualified health care expenses. These accounts, tied to high deductible health insurance plans, afford another path to investing on a tax-advantaged basis.

Rebalance and Work on Tax Planning

Reviewing asset allocation is another important step in completing a summer portfolio checkup.

"Summer is the perfect time to rebalance your portfolio and start tax planning," Baker says. "Investors should look for ways to tax harvest on nonqualified portfolios and now is the time to set their portfolio up for the long term."

Rebalancing should be done at least semi-annually, if not quarterly, Brenner says, so summer may be a good time to pencil in an overdue portfolio review. In following a schedule for rebalancing, focus on the bigger picture, versus which way stocks are moving.

"To do otherwise is tantamount to trying to time the market, which is a fool's errand," Brenner says.

In terms of tax planning, Baker says to consider executing an IRA Roth conversion before the fall. This could save some stress versus attempting to do it at the end of the year.

Converting traditional IRA assets to Roth IRA assets can yield tax advantages in retirement, as qualified withdrawals would become tax free. But it's important to consider the upfront tax implications, as Roth conversions can increase taxable income for the year.

Schedule an Advisor Check-In

Working with a financial advisor to guide decisions is only effective when there's an ongoing dialogue.

"Having an advisor and a portfolio team that's always watching your portfolio so you can enjoy life is one advantage of using an investment manager," Kubie says.

Focus on doing some basic housekeeping tasks for the short term, while discussing long-term objectives. For instance, it's a good time to talk rebalancing while also reassessing risk tolerance. If there's been a major life change recently, such as a transition to a new job, that's something else to cover as it could impact investment choices going forward.

Avoid the Fear of Missing Out

If stocks pick up the pace during the summer months, it's tempting to buy in to a trend but one shouldn't necessarily follow the crowd.

"Don't be tempted to chase the top performers year to date, as this can undermine your overall diversification strategy," Geletka says. "Also, don't let your interest in short-term hot stocks derail your long-term financial goals."

Baker says investors should keep a level head if and when volatility sets in to avoid overreacting or making the wrong decision with portfolio management. Tuning out the white noise, both from media outlets as well as other investors can help keep volatility and stock trends in perspective.

[See: 8 Questions to Ask Your Financial Advisor During Volatile Markets.]

"At social events over the summer, investors may hear how well other investments are doing and get investment envy, but don't chase returns over the summer," Baker says. "Everyone will say they have the best investment; it's important as an investor to avoid feeling like you are missing out."

And don't sell in a panic if a particular fund or stock is underperforming during the summer.

"Don't overthink it," Engelbart says. "Yes, the summer months tend to have a bit lower returns historically but this last June saw the best June returns since 1955. Sitting out of the market for any prolonged period of time may create many more issues than benefits."



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