Recession, tax consequences & loss carryover - HELP!

While I can not give you financial advise.......! Really, I shouldn't and won't. However.....

1. There are financial advisers and yet even more financial advisers. Some are fee only, meaning they are not in the business of selling stocks, bonds, mutual funds, annuities, etc... If you want to find an adviser, this is the guy to look for, and chances are he won't be even 50 miles away, but in a much larger burg.
2. You say most investments are in mutual funds. Good, I say. Use an internet site like Yahoo Finance to look at each one, paying attention to Morningstar ratings of the funds. If they're four stars, hold em. If the investment is common stock, and analysts don't like em, i.e. average recommendation of 2.5 or less, fold em.

I guess I'm saying take a look first and see if you can make heads or tails out it.

Many clients ask me for advise, but all I can tell them is what I would do if I were in their situation(s).

ChEAr$, Harlan Lunsford, EA n LA

sandy wrote: ...questions about subject...

I would add to Harlan's advice to _NOT_ be precipitate in making decisions here...depending on age, if you were comfortable w/ hubby holding these investments, it might just well be you've got time to ride it out, anyway. Are they in IRA or other retirement accounts or not is another major factor. There are just too many unknowns and this isn't a good place for specific advice so I'd again urge caution in going too fast.

The $3000 is a annual carryover maximum for that small detail...what you wouldn't use this year could/would be carried to next.

You can offset current gains with carryover loss until you run out. You can also offset up to $3,000 of ordinary income with carryover loss.

Seth

First, sorry for your loss. This is not the time to make rash decisions.

The losses first apply to to any gains during the year, then up to $3K against ordinary income, then if any remains, it gets carried forward.

I don't have the data handy, but a money manager who was a guess on Maria Bartiromo's* show last week remarked that the S&P averaged 9% during times of recession. A recession tends to drive interest rates down, which in turn makes shock, esp dividend paying stocks, more valuable.

While I'd not recommend the 'selling a good portion', I would look at your allocation, and find the mix that lets you sleep at night. Keep in mind, you will likely see rates continue to drop further, and that means whatever you moved to money market funds will see yields drop following short term rates.

A number of index funds and/or ETFs can be used to create the right allocation, one that should take minimal effort to manage (you glance at the current percent and make a shift if it's out of whack compared to your target allocation.)

Not having a profile on you, I'll suggest this statement, and leave it for others to help modify:

"If the market dropped 30% by one year from now, I would buy more stock to get right back to my target allocation."

Your current allocation should be a mix so you agree with this statement. You see, if a drop of that magnitude would scare you out of the market and you would panic, your allocation is too high.

JOE

*I don't pay attention to the stock picking, I watch for the Greenspan interview, and listened to this one guest remark on a piece of historic data.

I agree that the near future for the market looks iffy, but more importantly I concur with the advice not to make any quick moves. As a new widow, you're in a new financial situation and I think you'll be better off and feel better about your situation if you figure out what that situation is first, then think about what financial changes to make to reflect it.

I wouldn't worry too much about the lack of nearby financial advisors since way too many alleged advisors are actually thinly disguised salesmen whose recommendations somehow always tend to be things that pay them commissions. (I live next door to a stock broker, and although he's a nice enough guy, I wouldn't dream of letting him get his hands on my money.)

Here are some books that I've found useful to figure out my financial situation, all of which should be available in a nearby library, or you can buy inexpensively online:

Eric Tyson, "Personal Finance for Dummies". Don't be put off by the title, he's a good writer and knows what he's talking about.

Andew Tobias, "The Only Investment Guide You'll Ever Need." This modestly named book mostly tells you about all the dumb things you can avoid by not doing them.

Burton Malkiel, "A Random Walk down Wall Street." Slightly more technical, but well written by a Princeton professor. This is the book that told us all to stop chasing trendy investments and in the long run index funds do at least as well.