In the investment world, we often focus on the excitement of finding the next great opportunity. However, one of the most critical components of a successful long-term strategy isn't just what you add to your portfolio — it's what you choose to trim. As we navigate a market increasingly shaped by AI-driven surges and fluctuating economic headlines, it is important to discuss the discipline of selling overbought positions and reallocating that capital into undervalued areas. The "Overbought" Signal When an investment becomes overbought or overvalued, it means its price has risen faster than its underlying fundamentals (like earnings and revenue) can justify. While it is tempting to "ride the wave" indefinitely, holding onto an overextended position increases your vulnerability.
Reallocating for Resilience Selling isn't about "getting out" of the market; it's about repositioning. By taking profits from overvalued sectors, we can move those funds into undervalued investments — quality companies or assets that the market is currently overlooking. This "buy low, sell high" cycle accomplishes two goals:
Addressing the Elephant in the Room: Taxes One of the most common reasons investors hesitate to sell is the looming specter of capital gains taxes. It can feel counterintuitive to sell a winning position only to hand a portion of those gains to the government. However, letting the "tax tail wag the investment dog" can be a costly mistake. Here is why the payoff is often worth the tax bill:
Managing Your Realized Gains While it is always our objective to manage your portfolio as tax-efficiently as possible, the extended gains realized in 2025 and the start of 2026 mean that many of you may have already seen meaningful — and in some cases significant — realized gains this year. These gains stem from our strategic decisions to trim or sell out of overbought positions — moves that reflect the strength of your portfolio's performance, our preparation for the next phase of the markets, and the discipline of our process. With some gains having been realized, this marks the beginning of the planning phase for the next year. We encourage you to contact your advisor to discuss how these transactions fit into your broader financial picture and how you might efficiently set aside funds to pay Uncle Sam in early 2027 if profits have been realized within a taxable, non-retirement account. If you access your accounts through AccountView, your realized gains for each account can be viewed under Accounts > Positions > Realized Gain/Loss. Instructions for logging into AccountView can be found on our FAQ webpage. For general estimating purposes, depending on your federal tax bracket, you may be subject to a 0%, 15%, or 20% federal long-term capital gains tax. State capital gains tax vary, so please confirm how your state may tax your proceeds. As a simple example: If you realized $10,000 of long-term capital gains and you fall into the 15% federal capital gains bracket, your estimated federal tax would be:
If your state also taxes capital gains — for example, at 5% — you would add:
In this example, your combined estimated tax would be $2,000. Your tax professional can help you determine the exact amount based on your specific situation. We encourage you to reach out to your tax professional for guidance on managing any tax liabilities associated with these gains as you look ahead to the 2027 tax season. Final Thoughts As Warren Buffett famously said, "In the business world, the rearview mirror is always clearer than the windshield." We cannot predict exactly when a peak will occur, but we can recognize when the "windshield" is becoming crowded with overvalued risks. Our focus remains on the long-term strategy we created for you. By staying disciplined and being willing to prune our winners to plant new seeds, we ensure your portfolio remains robust, no matter which way the wind blows. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. |
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Answering those questions (and knowing the rules) can help you adjust your strategy for the coming year. This helpful Essential Financial Figurespdf summarizes key rules, contribution limits, and related tax information to assist you in planning for the upcoming year. Please consult your tax, legal, or accounting professional before implementing any changes. |
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Taking a Side Gig? Here's How it May Affect Your Taxes Taxpayers who work in the gig economy may benefit from having a better understanding of how their work affects their taxes. People involved in the gig economy can earn income as freelancers, independent workers, or employees. They use technology to provide goods or services, including renting out a home or spare bedroom and giving car rides. Here are some things taxpayers should know about the gig economy and taxes:
This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional Tip adapted from IRS.gov |
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CAPTCHA Scams Are on the Rise - What to Know A common online security tool is now being used in a new type of scam. Cybercriminals are increasingly using fake CAPTCHA prompts — the familiar “I’m not a robot” checks — to trick users into taking actions that can compromise their devices. Instead of a simple verification, these prompts may ask users to click “Allow,” enable notifications, or follow additional steps that can lead to persistent pop-ups, phishing attempts, or unwanted software. These scams often appear through ads, suspicious links, or redirected web pages, making them harder to spot at first glance. Security experts note that legitimate CAPTCHA tests do not require enabling notifications, downloading files, or entering system commands — making those requests a potential red flag. As these tactics evolve, staying cautious when interacting with unexpected prompts can help reduce exposure to online threats. |
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Three different doctors say that Paul is their brother, yet Paul claims he has no brothers. Who is lying? ___ Last Month's Riddle: Olivia throws a softball as hard as she can, and even though it doesn’t touch anything and nobody touches it, the softball comes right back to her. How is this possible? |
MAY 2026 Newsletter: Reallocating for Resilience
May 11, 2026