3 Investment Management Strategies for a Down Market

Leading financial advisor Cary Stamp offers three potentially profitable investment strategies for market declines.





Tax Loss Harvesting, Roth IRA Conversions, and Buying Low with Dollar Cost Averaging.


Hi, I’m Cary Stamp, this is a Principled Wealth Moment. Nobody likes a down market, but I’m going to explain how we can profit, or at least set ourselves up in a better position, when equity markets go down. Life gives us these lemons, here’s the recipe for lemonade.

There are three things that I want you to think about today. The first is, if you have bought an asset that has gone down in value, think about the concept of doing what’s called tax loss harvesting. So let’s say that you put $10,000 into a large company, exchange traded fund or large company fund, and the value of that fund is now $8,000. Well, maybe that fund brand is very similar to the same type of a fund with another company or another ETF. Sell ETF 1, buy ETF 2. You’re able to take a $2,000 loss on your $10,000 investment and you can use that to offset other gains that you might have elsewhere in your portfolio, this year or even in future years.

So in our portfolios, we’re always looking for strategies to be able to keep our investments the same, but take tax losses along the way.

The second strategy that I’ll talk about is converting traditional IRAs to Roth IRAs.  I think most of us know that a traditional IRA, at some point in the future, taxes are due on any money that you take out of it. But you can take money out of it right now while the markets are down and move that money over to a Roth IRA, so that everything that it earns between now and whenever you’re no longer here is earned on a tax free basis. That can be a huge benefit. So when we’re thinking about doing Roth IRA conversions, this is the ideal time to start thinking about moving money from future distributions that are taxable, to Roth IRAs where the future distributions are not taxable. You’re going to pay tax as you go through this process, but after that, there’s never any more tax due.

And then the third thing that all of our investors should be thinking about is if you have some cash that’s sitting on the sidelines, set up a dollar cost averaging strategy. I don’t know how far the markets are going to go down, I don’t know when they’re going to turn around. And I really don’t believe people that tell me that they know the answer. But what I do know is that if you systematically start investing without allowing the emotion in your head to dictate the terms, that you will do very well over a long period of time. So if you have extra money, put a little bit in next month, a little bit in the month after, and a little bit in the month after, and continue that on an ongoing basis.

If you do these three things that I’m recommending, when we come out of this and the markets eventually head back up, you will be in a much better position. I’m Cary Stamp. This has been a principled Wealth Moment.

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