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Craig Lundquist, MBA, ChFC®, CRPC®
VP of Wealth Management
651-773-2757
Kristin Becker
Senior Administrative Assistant
651-773-2821
Ideal Wealth Advisors
Located at Ideal Credit Union
8499 Tamarack Road
Woodbury, MN 55125
CRPC conferred by College for Financial Planning
May/June 2023
Investing in the Midst of Volatility
The past couple of years have certainly emphasized the fact that investing has never been a sure thing. Stock prices fluctuated wildly and riskier investments like crypto reminded most of us of the definition of “extreme” risk. Global inflation, rising interest rates and geopolitical unrest further combined to roil markets and make investors nervous.
When stock prices and other investments decline in value and inflation soars, investors face a conundrum. Equities have historically been the hedge of choice when inflation is shrinking the value of your dollar, but recently the market downturn coincided with record inflation. According to S&P Dow Jones Indices LLC, the 2022 return for the Standard & Poor’s 500 Index was down almost 20%.*
What Now?
In this environment, it’s crucial to work with your financial professional to review your portfolio to identify any necessary changes to your investment strategy.If your investments are allocated with your time horizon and goals in mind, and if you have rebalanced your portfolio to account for falling equity prices, you may be able to wait for stocks to rebound. If it’s safety you’re after, look at fixed income investments — particularly of Treasury securities, whose yields have risen from near 0%.
IF YOU HAVE REBALANCED AFTER THE STOCK MARKET DECLINE, YOU MAY BE ABLE TO WAIT FOR A POTENTIAL MARKET REBOUND.
While you deal with current volatility, you may want to position yourself to take advantage of investments that do particularly well when equity markets rebound, or you may want to explore alternative investments.
Alternative investments, from real estate and private equity to precious metals and collectibles, can help you diversify your portfolio. Beware, however, of putting too much into any one type of investment, and think hard before putting a penny into something you don’t understand.
Take Solace
Meanwhile, if you do suffer capital gains losses, take solace in the fact the IRS will allow you to deduct some of them each year. A capital gain or loss is the difference between your basis, which is typically the historic cost of an asset or investment adjusted by certain previous deductions for depreciation and depletion, and what you get for selling it.If your investments have a realized net capital loss, you can deduct up to $3,000 of the loss against your income annually if filing jointly ($1,500 if married filing separately). If your losses exceed the annual limit, you may carry losses forward to future years, deducting up to $3,000 per year against your income until your capital losses are exhausted. Talk to your financial and tax professionals to learn more.
*Forbes.com, January 2023
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