5 Things You Can Do During A Market Correction
As of June 16, 2022, the stock market is down 23% for the year and we are officially in a bear market now. And while it seems that the market correction can only intensify and cause us all suffer more pain and losses, it is for sure not a good enough reason to stay put and do nothing. There are some important things we need to do now in order to take advantage out of it and benefit financially in the long run.
5 Things to Do to Benefit From a Market Correction
1. Stay Calm and Don't Panic. Corrections do happen and they are a part of the game…. the key here is to not act based on your emotions. Instead, follow your investment strategy and wait until the market bounces back.
2. Make Your IRA Contributions Now. While it is unknown whether the market has bottomed out yet or not, you can fund your IRA now and utilize the dollar-cost averaging strategy to take advantage of lower prices.
3. Consider a Roth Conversion. If you’ve been waiting to convert your Traditional IRA to a Roth IRA, now could be a good time given the decline in your portfolio’s value. Your tax on the conversion will be significantly lower.
4. Harvest Your Losses. If you have a taxable brokerage account, chances are you are seeing noticeable unrealized losses across the board. To reduce your tax bill, consider realizing those losses and reinvesting the proceeds into similar but not substantially identical investments. Make sure to not run afoul of the wash-sale rule.
5. Rebalance Your Portfolio. This correction has caused some shifts inside your portfolio’s target asset allocation. Consider selling overperforming assets and reinvesting the proceeds in underperforming assets – this will help to keep your portfolio risk under control and in line with your risk tolerance.
If you have any questions for us, feel free to reach out below.