Mar 19, 2020 | COVID-19, MBE CPAs, MBE Wealth

Last Updated: September 25, 2020

6 Strategies To Take Advantage of This Bear Market

With fears surrounding the economic impact of COVID-19, our partners at MBE Wealth Management would like to offer 6 tips to help you take advantage of the current market decline.

  1. Consider making your IRA contributions now. Take advantage of this market decline and use it as an opportunity to purchase more shares for your portfolio. It may seem counterintuitive to buy during a declining market, but this gives investors an opportunity to add shares that are effectively “on sale”.
  2. Increase your monthly retirement plan contributions. Regardless of the type of retirement plan you own, it’s always a good strategy to increase your contribution rate each year. During these times of investor panic and market decline, increasing your contribution now can help you get a jump on increased growth.
  3. Rebalance your portfolio. Most financial professionals recommend annual or semi-annual rebalancing in order to maintain your longterm asset allocation. We also recommend rebalancing in times of steep market declines. You may find an opportunity to sell some investments that are now overweight to your longterm asset allocation and use those proceeds to fund investments that are currently underweight. 
  4. Harvest losses. Perhaps you’ve sold a business or an investment and are anticipating capital gains this year.  You may be able to reduce these gains through a strategy known as tax-loss harvesting.  Tax-loss harvesting allows you to sell investments that are down, replace them with reasonably similar investments, and then offset realized investment gains with those losses.  The end result is that less of your money goes to taxes and more stays invested and working for you.
  5. Consider a Roth conversion. There are benefits to converting your pre-tax retirement assets into Roth assets. Those benefits become compounded when you convert while the assets are substantially down in value. In a simple example, consider an investor whose initial plan was to convert $10,000 of their Traditional IRA via 100 shares of XYZ at $100 per share. If the share price of XYZ is now $80 per share, this investor can now convert 125 shares of XYZ with the same tax consequence.
  6. Focus on the long term. Smart investors have written longterm financial plans. They recognize shortterm panic interferes with good financial decision making. If you don’t have a written longterm financial plan, now is as good of a time as any to find a professional and create one!

If you’d like to discuss these or learn about more ideas, please don’t hesitate to reach out to us or the team at MBE Wealth Management. These strategies may have tax consequences so be sure to consult your tax professional for guidance.