December Newsletter to Clients
Submitted by Moneywatch Advisors on January 7th, 2025Enjoy this month’s edition that features a review of the market, a reminder of capital gains distributions and a thank you to our clients.
November was a terrific month for stocks in a year terrific for stocks. The S&P 500 Index of large, U.S. companies was up 5.7% in November – its best month since last November. Year to date, the Index is up over 26%! And, if history is any guide (and it isn’t since past performance does not guarantee future results) the Index finishes higher in December 73% of the time – its best winning percentage of any month. Thus, Wall Street has dubbed this the Santa Claus rally.
The U.S. Aggregate Bond Index has earned just shy of 3% on the year. While this isn’t as spectacular as the stock market, bonds have done their job by preserving capital and providing steady income. One of our main bond funds, Dodge & Cox Income (DODIX) has returned 4.3% on the year, surpassing its benchmark by more than 30%.
For those of you with Individual investment accounts or Joint investment accounts – not IRAs, Roth IRAs or 401(k)/403(b)s – the good returns come with some potential consequences. The mutual funds we all own are required by law to make regular capital gains distributions to their owners. A capital gain distribution is a profit from the fund selling any of the stocks it holds for a gain during the year. (Losses can also occur from stock sales within the fund) For instance, a fund many of us hold is Madison Dividend Income Fund (BHBFX). It will pay a capital gain distribution in December worth an estimated $2.50 per share. That means if you hold 10 shares of BHBFX, you will receive $25 in capital gains distributions. These distributions are taxed at capital gains rates which are lower than ordinary income rates. So, most of us will pay 15% or 20% on that $25 in capital gains. Our 1099 statements mailed by Schwab in late January or February will include those amounts.
As we do every year, at the end of December we will try and offset those capital gains for each client by attempting to sell assets that are worth less now than what you paid for them. The objective is to try and offset gains with losses and minimize your tax impact. Because this has been such an outstanding year for investments, however, those opportunities may prove hard to find this year.
As we approach the end of the year, please know how much we at Moneywatch appreciate each of you. Bob Bova, the founder of Moneywatch, adopted the guiding principle of “if we put the client first in everything we do, everything else will take care of itself.” More than forty years later we ask ourselves before providing any advice, “is this in the client’s best interest?” For my family and for everyone at Moneywatch, this is truly a labor of love. Thank you for investing in yourselves and for trusting us.
Thank you for your continuing confidence.
Ramsey Bova, President & Owner, CFP®
