It did not take long after the new administration took office for the raising of taxes to become a hot topic. I just read that there is a proposal to raise the capital gains tax for over $1million to 39.6% plus the 3.8% already in place. That totals over 43%.
While most investors will not pay at this level, they will realize an increased rate.
The real focus of the article is that raising the rate to 43% will cause the selling of growth stocks. The article stated this would make dividend and value stocks much more attractive.
Portfolios build with primarily growth stocks looks great right now. But will that continue?
As an example, during the dot.com crash starting in 2000. Growth stocks went into a 3-year downturn. During this time dividend and value stocks increased in value.
Did this article use this as evidence that this would repeat? I have no idea and I believe neither does the author.
Many of you that have been reading my emails know I do not believe there is anyone who can predict the future, consistently. Any advisor that appears able to predict the hot sector or asset class will not be able to repeat.
The real message is that you will invest with less anxiety with a globally diversified portfolio at your appropriate level of risk. Unless of course you enjoy higher anxiety.
You will also realize better long-term results.