5 Great Ways To Turn the Pandemic Into Financial Progress

We are often asked, “Will investors see a V-shaped or a U-shaped recovery from the measures taken in response to Covid-19?” While this answer changes our short-term plans, it assumes we will eventually recover from this pandemic. Long term investors face a different and more relevant question; “What has changed for good? While we don’t have the ability to see the future, we suggest you consider the following tactics for increasing your odds of success in a post coronavirus economy.

1. Have a Goal Based Financial Plan

Winston Churchill said during the battle of Britain, “failure is not fatal: It is the courage to continue that counts.” This statement holds true for our current battle with Covid-19 and is especially relevant for investors right now. Some investors live under the gamblers curse—thinking that today’s market value represents a complete loss never to be recovered. However, it is important to remember that if you didn’t sell, you have assets with earning—and sometimes losing—power in varying degrees. The assets you hold and their short term gains or losses are not as important as the life goals your investments represent. This perspective can guide us to better answers to how we should feel about the current market and whether we need to adjust our portfolios. For this reason, we recommend having a goal based financial plan. This tells you how much money you need, but more importantly, when you need it. From there, you will see that as long as you have the amount of money you need when you need it, the losses you experience in the interim are not fatal.

Camelotta Advisors helps our clients focus on what matters in a time like this. We have our clients ask themselves, “Can I still reach my financial goals with this pandemic?” rather than “How much did I lose due to the pandemic?” By creating an individualized goal based financial plan for our clients we are able ease their fears in this trying time and reassure them they can still achieve their goals.

2. Use This Time to Understand Your Personal Risk Preferences

Are you a risk taker or are you risk averse? A risk taker would rather be in the stock market when it goes down so they can also be in the market when it goes back up. Someone who is risk averse would prefer to be out of the stock market when it goes down more than they would like to be in the market when it goes up—in other words they don’t like the volatility of the stock market. One risk preference is not better than the other from an investing standpoint. Most people tend to say they are risk takers but the massive selling in March tells us that many people found out they are risk averse after it was too late. It is imperative that you understand your risk preferences when investing, not knowing could cost you more. A good investment advisor can help you determine your risk preference so you can live through volatile times without making the rookie error of selling when prices are down and buying when they are high—this is a get poor quick scheme.

Camelotta Advisors works with all our clients to determine what risk category they fit into. This ensures our clients have less worry during up and down markets.

3. Turn Your Losses into an Opportunity

There are ways in which you can recycle the losses you endured in the market to create opportunities to benefit down the road. For example, in your taxable investment accounts consider tax loss harvesting. Losses on stocks can be warehoused to help offset the tax burden you may have from your future winning stocks. Be careful of the wash sale rule! This strategy can reduce your overall capital gains tax burden and is a great way to turn your losses into assets. We assist clients by identifying losses, teasing them apart from gains (even within the same stock), and helping avoid the wash sale rule.

Many investors are likely facing reduced values in retirement accounts due to the downturn in the market. Before these accounts recover, it is a great time to convert them to Roth accounts which increases your tax-free retirement funds. When converting a retirement account to a ROTH account investors face a tax on the conversion amount. By converting while the account values are low you pay less tax than you would by converting while the funds are high. Therefore, we have a circumstantial opportunity to do asset location by placing the assets with high expected earnings into the ROTH account where we can enjoy these earnings tax free!

Camelotta Advisors constantly looks for opportunities to make losses work for our clients and implements these strategies to harvest tax losses.

4. Buy Quality Securities for Low Prices

In a market like this, there is often an opportunity to buy high quality securities for much lower prices than you would normally see. The sell off in March was indiscriminate and left many good investments available at very cheap prices. You can look to the company’s dividend yields and bond ratings to help determine if a quality company is sitting at a low price. You don’t want to risk investing in a bad quality company so do your research. Highly rated companies that pay greater dividends than the bond yields of lower rated companies are poised to gain. This unique situation can result in personal wins if you take advantage of this rare opportunity.

Camelotta Advisors ensures all our clients are invested in quality funds and strives to find the positives in every market situation, good or bad.

5. Rebalance Your Child’s 529 Plan

With the current market volatility right now is a great opportunity to add value to your child’s 529 plan. However, 529 Plans only rebalance on the child’s birthday, so they don’t always take advantage of unique market opportunities. There are multiple ways to force a rebalance on the account to capture the current market events. To learn more about rebalancing 529 plans visit—What You Need to Know About 529 Plans

What's the next step?

We have the insights that turn investment plans into action. We offer a disciplined rules-based investment approach specially designed to help our clients improve their odds of investment success. We invite you to see how we can apply some or all the above insights to your situation in the ways that we currently apply them for our clients. If you have any questions about the strategies above, get in touch with us today.

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Camelotta Advisors is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Camelotta Advisors and its representatives are properly licensed or exempt from licensure.  This website is solely for informational purposes.  Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Camelotta Advisors unless a client service agreement is in place.

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