These past couple of weeks have been treacherous for the markets. Between the media, coronavirus, the media, the primaries, the media, Saudi and Russia’s oil feud, and the media…market volatility came back with a vengeance. We don’t believe the markets are headed for doom and gloom. Two weeks ago, we wrote a piece on why if you haven’t read it. In fact, we believe a pullback like this is healthy and much needed. So now that we have that out of the way, one question remains. What opportunities should I be looking at?
#3…Spring Harvest…It has been many years since the markets have given us much opportunity to do some “tax harvesting.” If everything is going up, it’s hard to sell much because it would be at a loss, yet a volatile market is an opportune time to harvest some tax losses. Another bonus here is that big returns in the market have created a hidden risk for a lot of investors due to being over-weighted in certain areas, and a harvest season may be the perfect time to make sure your investments are in-line with your goals and your risk.
#2…Cash is King…Are you selling a business or some real estate? Or do you have some cash or CDs that need to be put to work? I don’t know about you, but I like to buy things when they are on sale. There are some amazing opportunities in the market right now and not just for the big risk-takers. Who knows? You may be able to take a cash offer on a long-waited sell for a little less just because you can buy something on the flip side for a little less. Remember, opportunity often comes disguised in the form of misfortune, or temporary defeat.1And, it doesn’t cost anything to ask about it.
#1…Free Money…There is no such thing as free…right? It depends on how you look at it. If you bought 100 shares at 10 dollars per share in an IRA, you would have 1,000 dollars. If you subsequently took this out of the IRA, you would have 1,000 dollars of taxable income. Now, let’s imagine you did not take it out of your IRA. Instead, your investment went down in value. It’s now worth 8 dollars per share. Let’s also imagine you recognized the opportunity to convert these shares to a Roth IRA. You then pay tax on 800 dollars. Eventually, the investment rebounds to the 10 dollars per share. Wala! That sounds like free money to me. But wait - there is a bonus….
***Bonus***….Now that you know the basic concept of “Free Money,” it is time to talk about the SECURE Act. You know, this is the legislation they just passed in an effort to raise the taxes on IRA and other qualified money. If you aren’t familiar with it, read this. The thing is, the government also gave you a choice on the matter. So here is the plan. You can pay less in taxes and your kids can pay less in taxes. And since your grandchildren are your favorite anyway, their inheritance is tax-free. How? This is where we come in.
Michael Josephson, who is the author of one of my favorite poems—What Will Matter, stated, “No opportunity worth seizing is going to knock on your door. Opportunities are everywhere, but like hidden treasures you have to find them.” Now that you have found them, what will you do about it? Remember, the market often climbs a wall of worry. If you blink, you might just miss the opportunity you found.
- Quote by Napoleon Hill
Past performance is not indicative of future results. There are no guarantees, implied or otherwise, of any investment performance in conjunction with these strategies.