It’s been a turbulent year for the stock market, with wild swings, market declines, and sensationalism of the “NEWS” cycle that has left many investors feeling anxious and uncertain.

To be crystal clear – we are in a “BEAR MARKET” (as marked by a decline in equity prices of more than 20%).

Financial media are narrowly correct in shouting that there’s no end in sight. This is nothing more than a statement that no one knows where the bottom will be, and we are certainly not calling one.  For what it’s worth, with just about every passing day, we note that we are getting closer to the percentage decline, down about a third from the previous top, which the average post-WWII bear market has made its low.

Tasks to Complete in a Bear Market 

Communication is 1^st on that list

We need to hear from you.  Our global attempts to reach you (like this letter), while efficient, have nowhere near the impact of a phone call, virtual meeting, or best yet, an in-person meeting.

Meaningful relationships are built on communication – in the good times and the challenging times.  We value our relationship and welcome any conversation.

Revisit your War Chest

Part of our investment philosophy is holding five years’ worth of portfolio income in fixed-income investments.  This ensures that we do not have to sell any of our growth investments when they are down in value.

Take inventory of your income needs.  The rest, for most of us, needs to be in growth assets.

Tax Loss Harvesting

The current state of the stock market provides an opportunity for investors to take advantage of a tax-loss harvesting strategy. This is when you sell investments that have lost value to offset capital gains from other investments or “harvest the losses” for future use against capital gains. This can be a great way to lower your taxes this year and potentially in years to come since those losses “carry forward” to future years.

* NOTE:  This does not apply to retirement accounts (IRA, 401k, etc…), but to individual and joint accounts.

Consider the ROTH Conversion

The current market decline has created an opportunity for investors to convert their traditional IRA accounts into Roth IRAs with a lower tax consequence.  Taxes due on a 100k conversion vs an 80K conversion are lower.  Position your investments for tax-free growth in the Roth IRA (which will further help the tax liability of future withdrawals either by you or your loved ones that inherit the retirement asset).

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.” The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Beware of the Vultures

Just watch – People will reach out, offering certainty and promising to end your anxiety.  They will even use scare tactics. Many will prey on your emotions and try to sell you products that are not in your best interest. Those people won’t consider how these products fit into your plan.  Go figure, these “solutions” offer big commissions.  By the way, and this is very important, we can position these same “solutions” to you as well.  If we thought it was in your best interest and fit your personalized plan you would already own them!

Beware of the vultures, and know that we have your best interest at heart.

Money = Feelings (this one is for us)

As Certified Financial Planners, we must remember Money=Feelings and not be flippant about it.

“We all know that no matter how worried, scared, or excited we’re feeling, 2+2 always equals 4. But when it comes to money, 2+2 equals feelings. As it turns out, money is not in the math department. It’s in the psychology department.”

– Carl Richards. 

Money is emotional. We attach meanings and feelings to it, which can cloud our investment judgment. We must be aware of these emotions and ensure they don’t influence our decisions.

When the stock market is down, it can be tempting to panic and sell our investments. But this is usually a mistake. It’s important to remember that the market will eventually rebound, and those who sell in a panic will often miss out on the recovery.

In addition, you may have peers, friends, and even family members who have expressed significant distress over the market’s current decline. We would happily meet with them to offer some long-term reassurance and give them insight into our investment policy.

Invest Confidently.

— Nic & Jeff

We are a full-service financial advisory company that allows you to make a one-page plan for your money and prepare for your future. Learn more about what we do and how we can help you here. 

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Bonds are subject to market and interest rate risk if sold before maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

* LPL Financial does not provide tax advice. Clients should consult with their tax advisors regarding the tax consequences of investing.