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  • Writer's pictureEiger

What to Do With Your Portfolio During Turbulent Times

COVID-19’s continued stifling of the global economy will likely get worse. What strategies can help boost your investment performance?

Buy at discounts

Instead of panicking because of the significant drop in certain investment values, we are looking for the right time to take advantage of the discounted prices. As we all know, trying to time the perfect entry is a loser's bet. We are waiting for several economic signals that indicate the markets are normalizing. At that point, we plan to rebalance our portfolios to their target allocations. That means that we will sell shares of the investments that have held up reasonably well to buy additional shares of those investments where prices dropped most significantly. In the long run, this rebalancing should stabilize the allocation and performance.

For those who want to take a more aggressive approach, we can increase the target allocation to highly discounted sectors.

Alternative strategies

Make sure you have alternative strategies in the portfolio that aim to reduce volatility in the portfolio while increasing the upside potential. We expect certain private opportunities to do well even during a prolonged pandemic.

Stay the course

Besides rebalancing and having a proper allocation to alternative strategies, focus on the long-term financial plan that has been set up. Volatility is expected in the markets, and, although painful, diversified portfolios have historically recovered as the economy improves.

Trigger tax savings

We also consider replacing certain investments that experienced significant losses with somewhat similar opportunities. By selling these loss positions, we are realizing tax losses that can be used to offset future gains. This process is called tax-loss harvesting.

Refinance mortgage

An interest rate cut by the Federal Reserve has a tendency to reduce mortgage rates indirectly. In addition, during a global crisis, investors tend to flee to safe-haven investments like treasury bonds. The increased demand can further reduce mortgage rates. With lower interest rates, you may want to consider refinancing your mortgage.

Roth Conversion

Chances are, your IRA has gone down in value. If you expect those values to recover once the global crisis rescinds, then what better time to convert the IRA to a Roth IRA? This strategy works particularly well if you have sufficient time left to recover from the initial conversion tax hit and the current market drop. Any gains after the conversion will be tax-free. This strategy is most effective if you can pay the conversion tax with taxable assets and not with money from the IRA.

Take advantage of available regulations

Use available strategic moves such as delaying your tax filings, delaying payment dates for some entities, contribute to retirement accounts because of extended deadlines for IRAs, Roth IRAs, and HSAs contributions. Take advantage of new laws that provide relief or delays in the payment of tax on retirement plan distributions as outlined in our blog post on March 30.

Stay healthy

Last but not least, stay healthy! Listen to your government and local health officials. Social distancing works. After all, you want to be healthy when the economy and markets recover.


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