Today we explore some common questions that people ask during a stock market decline.
We discuss what a financial advisor does and doesn’t do for their clients in bear markets, whether you should refinance, and the benefits of tax-loss harvesting.
Listen in to hear what you could be doing to stay proactive during this market decline.
What are the benefits of working with a Financial Advisor during a Stock Market Decline?
Financial advisors can be a great resource during a stock market decline. The fear you feel in these situations can be paralyzing. If you don’t have a financial advisor to help you act in your best interests, you may end up not taking any action at all.
So what are some things a financial advisor can do for their clients during these challenging times?
- Create a financial plan and an investment plan. You need to know what your strategy is and why you are investing. Not having a plan is putting yourself at too much risk. Listen to the wise words of Warren Buffett, “risk is not knowing what you are doing.”
- Rebalance investment portfolio. When the market takes a dive, it could be an excellent time to rebalance your portfolio.
- Tax-loss harvesting. Nobody likes to pay taxes and tax loss harvesting is a great way to minimize your current and future taxes.
- Help avoid making irrational decisions. It’s hard not to sell when the market drops 10% in a day or 30% in a month. A financial advisor can help talk you down off of that cliff, and avoid making an emotional decision. Because,the stress of being out of the market can be just as great as the stress of being in the market.
Should I refinance my home?
One way to give yourself a bit of control during times when life is feeling out of control is to consider refinancing your home. Since mortgage rates have declined in recent months now may be the right time for you to refinance.
You’ll want to analyze what your break-even point is to see if it is worth it. There are many different ways you can go about refinancing. You could use a mortgage broker, you could go through your own bank, or you could use an online mortgage lender. Listen in to hear the differences between those 3 options.
What is tax-loss harvesting and why is it important during a market decline?
We all feel the urge to do something with your investments when stock markets begin to drop. But instead of doing something that could be detrimental to your wealth, tax-loss harvesting can give you the opportunity to increase your wealth over time.
The biggest question we hear surrounding tax-loss harvesting is why would I want to lock in losses? The answer is to not think of it as a loss, but an exchange. You are taking that loss to reinvest in something similar and then use that loss to offset future gains. Find out if tax-loss harvesting is right for you by listening to Allison Berger’s excellent analysis.
Outline of This Episode
- [0:27] Should I use a financial advisor during a market decline
- [4:50] Should I refinance my home?
- [8:36] What is tax-loss harvesting?
Resources & People Mentioned
Connect With Chad and Mike
- https://www.financialsymmetry.com/podcast-archive/
- Connect on Twitter @csmithraleigh@TeamFSINC
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