At the most basic level, business transition planning is a strategy that can be put into play when a business is sold or changes hands. For company owners nearing retirement, a successful transition plan can play an important part in creating and preserving the value of the business after it has changed hands.
Atlanta Financial Blog
Strategies to Grow Your Wealth During the Pandemic
During times of market turmoil and economic uncertainty, its tempting to focus exclusively on risk – risk to your portfolio, your income and your plans for the future. And making sure your portfolio is aligned with your appetite for risk and with your time horizon for investing is critical. But focusing exclusively on the risk of losing money can lead investors to overlook the opportunities market declines may bring. Baron Rothschild, an 18th-century British nobleman and member of the renowned Rothschild banking family, is famously credited with saying that “the time to buy is when there’s blood in the streets.” He took his own advice and made a fortune in the panic that followed the Battle of Waterloo against Napoleon.
While few people have the nerves of steel (or foresight) to buy at market bottoms, there are a number of less daring strategies you can consider that can actually help GROW your wealth during times like these. Some strategies you might want to consider are:
- Rebalance – No one can consistently time market “bottoms” perfectly. However, we need to remember that in past bear markets, the stock market has reached its low point and begun its upward climb well before economic activity reached its low point. Since market declines tend to impact stocks more than bonds, in a bear market your allocation to stocks is likely lower than your target. Rebalancing back to your target at or near market lows means you would be selling high and buying low (by selling some of your less impacted bonds to buy more stocks at reduced prices). Although the stock market has currently recovered quite a bit from March lows, you may still have this opportunity to rebalance if we see additional volatility through the rest of this year.
- Remain Diversified – It may be tempting to alter your portfolio allocation in favor of individual securities or sectors that are expected to weather the pandemic better than others. However, those securities or sectors may already be overpriced for just that reason. Now isn’t the time to let emotion guide your portfolio decisions. Avoid chasing relative “outperformers” and let your advisor and the individual fund managers make the complex decisions about what to over-weight and under-weight during difficult times like these.
- Dollar Cost Average – If you have “dry powder” (excess cash) on the sidelines, use a disciplined approach to invest. We recommend an approach called “dollar cost averaging” – periodic scheduled investing over a length of time appropriate for the amount of money and your outlook/risk appetite. For larger investment amounts and/or investors with a more conservative risk appetite, we are currently recommending spreading investments over a 6 to 12 month time period. If significant market dips occur along the way, you may want to speed up your investments to take advantage of cheaper prices.
- Minimize Taxes – We are always looking for ways to trim taxes in our clients’ investment portfolios, since reducing taxes means you can keep more money invested and growing. But the “silver lining” in a market sell-off is that the lower prices mean you can exit legacy holdings for preferred investments with a lower tax “bite.” You may also have an opportunity to realize tax losses, which can be used to offset capital gains that might have already been realized, or to offset up to $3000 of ordinary income in any given tax year.
- Roth Conversion – If you are in a low income year from a tax standpoint, you might want to consider a Roth conversion. This can be especially attractive when shares prices and values are depressed, since you can convert more shares/value. Consult your advisor to see if this is right for you
- Skip your RMD – As we have reported previously, the CARES Act allows you to suspend RMD’s for 2020. Not only can this reduce your taxable income, you will also benefit by keeping more of your dollars invested. Keeping your funds invested during times of market turmoil, especially in tax-advantaged accounts, can help your portfolio recover more quickly.
- Maintain the Appropriate Perspective – Understand you don’t own “the economy” or “the market” – you own a portfolio of funds of quality stocks and bonds. To help tune out the doomsday messages in the media, “lift the hood’ on your portfolio and inspect some of your top holdings. As you look down the list of names, ask yourself if you think those companies will survive – and possibly thrive – when the virus is behind us
- Focus on Actively Managed Investments- At times like these, a portfolio with a number of actively managed funds can be a great way to reduce risk while still participating in the eventual market recovery. As on manager said, this may very well be “a time to hunt with a rifle, not a shotgun.” At Atlanta Financial the core of our portfolios currently consist of actively managed mutual funds where managers have the ability to select holdings that they believe will weather current economic conditions well.
While we are spending many hours each week thinking of ways to mitigate risk for our clients, at Atlanta Financial we are also making sure making sure our clients’ plans and portfolios are positioned not just to survive these difficult times, but to thrive on the other side. If you would like to explore some of these strategies to see if they are right for you, please contact me at [email protected].
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