Times are always changing especially in the economic perspective and there are infinite cues on how one can maintain that positive investment goals. Relentlessly, there are still no smart solutions on how investors can deal with this anonymity but there are certainly ways on how they can little by little recover from these instances.
USA Today details three areas where investors can focus on when the market is turning sour.
1. Tax-loss harvesting
Tax-loss harvesting is one way to even out losses in your investment. After a decrease in your expected share, you can consider this as your way to credit the losses to a hopeful gain in the future.
"You sell shares to lock in the loss, which you can then use to offset gains on other investments, reducing your capital gains taxes," shared the outlet. "You can then buy back the investment (or a similar investment), as long as you satisfy the Internal Revenue Service's wash-sale rules. After all, as a disciplined long-term investor, if you liked the fund at $50, you should probably love it at $35, all else being equal."
2. Roth IRA conversions
Roth conversion is ideal for some investors which assets declined terribly. This option can help them get back on track by paying less taxes and possibly go tax-free in the future.
"When you convert assets from a traditional IRA to a Roth, income taxes will be due on the converted amount. So assets that have declined significantly in value are ripe for Roth conversion: You'll pay less in taxes because of the current depressed value, then you'll have the potential for future tax-free growth within the Roth IRA structure." as explained in the article.
3. Rebalancing
Rebalancing enters as an additional option when one wants to limit off the possible future loss of the investments that grew in the present. The lowered amount of your stock may lengthen your chance of growing that investment in the future.
"Conversely, if the stock fell in price so that it made up just 5% of the total portfolio, the same rebalancing discipline would have you buying this stock at the depressed price so that your allocation gets back near the 10% target. You'd be taking advantage of lower prices in search of long-term growth." according to the publication.
