As 2014 draws to a close, buyside traders and money managers may be buried in a flurry of last-minute activity, but there are several key tasks that all traders should be doing between now and the end of the year.
By Gregg Wirth
While it may be something of a cliché, a cluttered desk makes for a cluttered mind. Truth is, your desk is probably overflowing with reams of old analyst reports, stale market data and past required reading. (Everyone finished Flash Boys cover-to-cover, right?) And your computer desktop is likely equally clogged. Do yourself a favorget rid of some of this stuff. Data changes so quickly, and market trends move equally fast. Find what is happening now and what impacts your trading profile. Read that.
One of the most useful things a trader can do is to look at his or her portfolio or recent trades and see if they reflect changes that have occurred in the markets over the past year. Rebalancing a portfolio to reflect the markets current conditions probably should happen more than once a year, but it is vital at years end to toss out stocks that may no longer be relevant investments, to make room for new opportunities, and to make sure your asset allocation is in line with your risk profile.
So, you got a huge hole in your portfolio? The time to unload that big loss-on-paper is the end of the year because taking a loss reduces your trading gains and thus your tax liability. While no one likes losing, chucking the clunkers out of your portfolio in December could leave you smiling in April.
Some trading days around the holidays can be yawners. Thats the time to reach out, even with just a phone call or well-crafted email, and check in on important clients. With so much data and information churning out there, taking a moment to reassure them that youre not getting caught up in the minutiae of the market and are keeping focused on your portfolio strategy and your clients needs does wonders. Communication is a big part of things, said Craig Jensen, managing director at Armstrong Shaw Associates. You just want to make sure everyone is happy.
No one is really sure why, but stocks tend to move upward after Thanksgivingand its not just the retailers, although they may lead the rally. Over the past 25 years, the Standard & Poor's 500 has averaged a 5 percent gain during the holiday season, proving its not just Scrooge who likes money.
Often this trend moves into January as big institutions take on larger positions to replace those sold off at the end of the previous year. Do your portfolio a favor and scan the markets for bargains, especially among stocks beaten down by other investors tax-loss selling (See #3).
Besides portfolio actions, there are other things a trader should do before the end of this year. For example, write a letter to the Securities and Exchange Commission, says Joe Saluzzi, partner and co-founder of agency brokerage Themis Trading. The outcome of the SECs planned Tick Size Pilot program is going impact everyone and could be a cornerstone for further market regulation. It may be wise to have some input into that process. If you have an opinion then you should let it be known, Saluzzi said. (Hurry up, though! The SECs 45-day comment period began Nov. 3.)
