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How To Take Advantage of Down Markets – Finger Financial Five #82

“When one door of happiness closes, another opens; but often we look so long at the closed door that we do not see the one which has opened for us.” – Helen Keller

My dad and I would fish in the lakes and swamps in South Carolina. You can tell the highest the water had risen by looking at the cypress trees. The water had once been as high as the dark part of the tree truck; above that point, the truck was lighter in color because it has never been under water.  This dark/light line on the tree trunk is called the high-water mark. 

A lot of investors get caught up in their “high-water mark” with their investments. They think of the highest their investment has ever been and regard anything below that as bad.  

This is very much like driving. Your top speed on a road trip may be 70 miles per hour, but are you ALWAYS going to be driving your top speed?? Won’t you have to take some breaks? Take a curve?  Stop at a light? 

Always driving at a blinding speed isn’t important.  What is important is reaching your destination.  Over the whole trip, your AVERAGE speed gets you there in a reasonable amount of time.

This is how financial planning works. It is not the “high water mark” or “top speed;” instead, it’s having a good plan and following the plan.  Staying on track. 

If you are not a client and want to know if you are on track, CLICK HERE to set up a phone appointment. If you are a client, you do have a plan and can login to your personal financial planning site to see where you stand. Of course, call the office if you would like to discuss anything at all. 

Much like stopping for gas, food, and bathroom breaks, our financial plans are built for periodic “pit-stops.” It is as natural as the rise and fall of the tides. 

We don’t predict these “pit-stops,” but we definitely prepare for them.

I really wish I knew which would do the best all the time. I also wish ice-cream was as healthy as salads and vegetables. 

“But Jeremy, can you just predict when it will rain so we can stay home until it’s sunny?”

Legendary investor Peter Lynch summed up market timing this way:

“Far more money has been lost by investors preparing for corrections or trying to anticipate corrections, than has been lost in the corrections themselves.”

Sometimes we have sun and no traffic and can make good time. Sometimes we get rain and have to drive slower. We turn on our headlights and wipers. 

Mark Twain once said, “It ain’t what we don’t know that give us trouble. It’s what we know that just ain’t so.”

You wouldn’t sell your convertible because of a light drizzle, would you?

Would you sell your car and buy a bike because you caught a red light?

Investing does not have an off/on switch.  It’s more of a dimmer switch with perfect little adjustments. Best to stick to the plan and stay in the middle of the road.  Click here to see a discussion on how to view investments during a crisis

Here is a list of things you can do to take advantage of lower asset prices

  • DCA — also known as Dollar Cost Averaging
  • Roth conversions 
  • Tax loss harvesting –-You can take losses on investments that are down and re-invest the proceeds elsewhere. This may offset current or future capital gains, which can, in turn, lower your tax bill. 
  • IRA, HSA, 401k — Make contributions at lower prices. 
  • Estate gifting — Gifting assets at a reduced value can potentially be more beneficial.  If the asset value increases, it will increase in value outside of your estate. 

Let me know if you have any questions. Feel free to CLICK HERE to set up a phone appointment or email me at [email protected].  

On the lighter side, I played in the Dunes Club Member Guest this past weekend with my brother-in-law. He is a great player. We played well the first day, not very well on the second, and so-so on the third. It was supposed to rain all weekend, but the rain never came. We did have our rain jackets, just in case. Glad they didn’t cancel the tournament due to the forecast. Wonder how this relates to investing…………. 

Hope all is well with you and your family,

Jeremy

Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information.  My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.

This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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