Market downturns are never fun, but they can open the door to opportunities. Seizing these opportunities can enhance your finances and your outlook during difficult times. Here are a few strategies that might be appropriate during a market downturn.
Buy on Dips
The best time to buy investments is when prices are low. However, before you buy, you need to determine how much to invest and how quickly to do so. The answers largely hinge upon your financial needs over the next several years and your ability to absorb risk. Careful examination of your finances and financial planning is the best way to frame these decisions.
Realize Capital Gains or Losses
One silver lining of lower investment values is that they inherently reduce your embedded capital exposure. Selling investments at losses, or perhaps even lower gains, can help to reduce or eliminate positions, diversify your investments, and take advantage of tax strategies that can benefit you in the current year and perhaps years to come. However, it is often important to reinvest the sale proceeds to maintain your long-term investment strategy. Note: Any such reinvestments must be made with careful consideration of tax provisions that could eliminate capital loss benefits.
Make an Elective Roth IRA Conversion
Roth IRAs are powerful in achieving wealth creation. Electing a Roth IRA conversion when your account values are low helps to reduce the tax impact of a conversion while amplifying the value of future investment growth. Your current taxes and cash needs should be carefully weighed against these long-term benefits.
Transfer Assets for Estate Planning
If your wealth exceeds your expected lifetime needs, this could be an ideal time to gift or sell assets as part of your family legacy planning. Completing gifts at depressed prices freezes the value of the asset in your estate and transfers potential growth to your heirs. If successful, this strategy can reduce your future estate taxes and increase your legacy wealth potential. While family gifts can be powerful, they should only be completed after carefully evaluating your personal financial security.
Wise investment decisions extend well beyond individual investment selections. The overlay of various tax, estate, charitable, and legacy strategies can dramatically enhance the way you approach and implement investment decisions.
SageVest Wealth Management’s comprehensive approach integrates your investment management and financial planning decisions to capture opportunities. We help you to achieve your aspirations and enhance your potential. Contact us to learn more about positioning yourself for success.
