Being Smart with $$ -- If You Didn't Lose Money, You Didn't Have It To Start With

It hurts to look at our 401(k) and brokerage statements right now when we compare them to year end.  And you may be thinking that you wouldn’t have lost money in the stock market if you kept all your savings in the bank.  But you also wouldn’t have had the money to lose in the first place.  Losses in US stocks from recent highs are only giving back the gains you received over the last 14 months.  If you weren’t in the market, you didn’t earn the money and then you didn’t give it back.  But chances are, if you were in the stock market over the last couple of years, you have also been in it over the past several years before that.  And US stocks are up an annualized 10% over the last 10 years even after accounting for the recent declines.  So you can fear the market and keep your savings in super safe assets or you can look at a long-term chart of stocks and realize that long-term success as an investor comes with occasional short-term stress.  In the last 10 years, investors in a “total stock market index fund” have seen $100,000 grow to approximately $260,000 today while investors in less-volatile “aggregate bond index fund” have seen the same investment grow to less than $150,000.  Perspective helps in times like these.  (Past performance may not be an indicator of what to expect in the future and your individual circumstances should be considered in any investment choice.)

Larry Pike, CFAClient Priority Financial Advisors LLC
www.clientpriority.com

Being Smart with $$ -- Take Advantage of the Market Drop

If the health crisis we are facing isn’t enough, perhaps the stormy weather in the financial markets has you feeling even worse.  But when the markets are down, you have the chance to make some moves you wouldn’t otherwise make.  Take tax losses to reduce your tax bill but consider reinvesting the proceeds into a similar asset so as not to lose your market exposure.  Sell poorly performing funds you have wanted to punt that may no longer be at a tax gain and reinvest into low-cost better performers in the same sector. Convert assets from a traditional IRA to a Roth IRA with a lower tax bill since 100 shares of most assets today are worth less than they were 2 months ago.  You can sit paralyzed as the markets react to the coronavirus news or you can act on it and grab what benefits you can.  (Specific moves should consider your personal circumstances and you should consult with your financial professional to ensure actions are in line with your needs and tax laws.) 

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com
Blog: clientpriority.blogspot.com