Despite the stock market’s decline this year this is not the time to panic. Instead, take advantage of the markets. Here are a few thoughts that may be beneficial.
· Convert all or a portion of your traditional IRA to a Roth IRA.
o IRA’s grow tax deferred, where Roth IRAs grow tax free.
o You will pay taxes on the amount converted from your IRA to a Roth IRA, but the market decline means the amount that is converted in dollar terms will be lower than a few months ago. In addition, when the market rebounds the securities you converted will rebound tax free not tax deferred as they are in the current IRA.
o You should discuss your specific situation with your CPA to determine if converting the IRA to a Roth makes sense for you. If you have any general investment questions regarding your IRA or Roth IRA please feel free to contact me.
· Next, those of you with 401-k plans that are active should make sure you reevaluate your risk profile and if appropriate consider rebalancing your asset allocations. This will allow you to remain adequately diversified while also allowing you to structure your investments to take advantage of the current market decline.
o I realize many 401-k plan providers will not make specific recommendations regarding an individual’s risk profile and asset allocation. As an independent fee-only RIA we will gladly review your 401-k asset allocation and investment choices and give you our independent recommendation for your particular asset allocation. This is a complimentary service so please feel free to contact us for help.
· Finally, dollar cost average your individual equity holdings.
o If you liked the companies you were invested in a few months ago and nothing has changed with the company’s fundamental outlook then this is an excellent time to add to your positions. Long-term investors can use this strategy to take advantage of short-term volatility.
o This is not a recommendation to buy or sell any particular investment as each individual’s portfolio and risk profile is different. However, if you would like a specific consultation we are happy to do so. Just contact me and we can discuss your specific investment objectives as it relates to your investment portfolio and determine if any adjustments should be considered.
Jeff A. Iannone