4 Things To Do in This Volatile Market

Transcript: 

Hey guys, with 2022 turning out to be such a gut-wrenching year for investors, what are some things that you can do to try to make the best of it?

Here are four things to consider without having to predict where the market is headed over the next few months.

First, interest rates.

With interest rates jumping up in rapid fashion, you’re seeing not just savings and CDs paying more but treasuries too. You heard that right. The lowly 1-year T-Bill, which around this time last year was paying about 0.07% just bumped above 4% for the first time in about 15 years. With long-term money likely riding out the storm you need to be sure to have your idle cash working hard for you.

Next, Roth conversion.

I talked about this in my most recent video, and I’ll put a link in the description below. Since I just talked about it, I skip the details but the gist is this: On your pre-tax retirement accounts so your 401ks, IRAs, etc. you know you need to pay taxes to get your money out at some point. So might it make sense to pay some of that tax bill now while these asset values are low? With the assets now converted to your Roth, assuming the market eventually recovers, that rebound would now occur in your tax-free Roth?

Here's another concept that basically goes back to fundamental investing 101. Rebalancing.

So, as terrible as the bond market has been, short-term, high-quality bonds actually held up quite well. On the other hand, most people have had steep losses in their stock side of their portfolio.  Especially growth stocks. And so that may have shifted your allocation away from what your long-term target is. For example, if your portfolio started out 75% stock and 25% bonds, with the down market it might be now be like 65% stock and 35% bonds.

So disciplined, long-term investors, should consider rebalancing the portfolio by selling off some of those short-term bonds with relatively high values and putting those funds back into the lower valued stocks. This forces you to do the age-old adage of buy low and sell high. Like Warren Buffett said, be fearful when others are greedy and be greedy when others are fearful.

And finally, an idea for retirees currently drawing from your portfolio.

Is now a good time to revisit your Social Security claiming strategy? Maybe you’ve left too much of your portfolio in stocks and riskier bonds. And now you’re facing having to liquidate these assets at a steep discount from where they stood just a few months ago? So we know the general wisdom says you should delay receiving your Social Security benefits until age 70. But if that forces you to liquidate under heavy losses, that math may have changed. You may need to reassess your claim strategy and weigh that against preserving your portfolio and selling into a bear market.

I hope those are helpful ideas for you. If you have questions for me, visit me at www.retirementtheory.com, follow me on Facebook or my YouTube channel, for everything retirement planning!