By Alynne Zielinksi, MBA, CFP®, CDFA - Manager, Financial Planning
In times like this, it is natural to feel overwhelmed, stressed, anxious, nervous, uncertain. Name a negative emotion and everyone has likely felt it at least once over the last two months. No individual has control over the market, no doctor has an exact time when the pandemic will end, and everyone is left wondering when we can hug our families again. During these times it is easy to fall into a downward spiral of negative thought and emotion, wondering if there is anything we can control.
For many, investing is emotional too. Taking a disciplined approach and knowing how to take advantage of situations is critical. Removing emotion from the decision-making process can help give investors some measure of control over the future. In this unprecedented environment here are a few strategies to think about implementing.
1. Tax Loss Harvesting.
In taxable accounts, consider selling some securities that have experienced a loss. By realizing the loss (harvesting), taxes on both short and long-term gains as well as income are offset. When looking for investments to harvest, consider those that may not fit your strategy or that can be easily replaced by similar investments. Before harvesting please keep in mind:
2. Make Estate Planning Gifts Now
If there are assets in your portfolio you were considering gifting to the next generation, make that gift today. The value of your gift will be lower and may help you save on future estate taxes.
3. Rebalance your portfolio
With the downturn, it is likely that your asset mix may not be in line with your intentions. Equity prices have fallen much more than bonds possibly making you overweight in Fixed Income in your portfolio. Consider slowly rebalancing your portfolio by moving money from your fixed income investments to your equity holdings until you reach your intended allocation.
4. Dollar-Cost Average Back into the Market
If you have cash on the sidelines, create a strategy to invest a specific amount of money on a regular basis. This is how contributions are made to 401(k), 403(b) and 457 plans. Be the tortoise in this race. It isn’t necessary to get in at the bottom and have all funds invested before the top of the market. Having some cash left will allow you to take advantage of future dips in the market.
5. ROTH Conversions.
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